Explain the meaning of “cross-rate consistency” as used by MNEs. How do MNEs use a check of cross-rate consistency in practice?
Answer to relevant QuestionsInfrastructure weakness was one of the causes of the emerging market crisis in Thailand in 1997. Define infrastructure weakness, and explain how it could affect a country’s exchange rate. Define the following terms: a. Hedging. b. Currency risk. What does the word translation mean? Why is translation exposure sometimes called accounting exposure? What is the primary difference between losses from transaction exposure, operating exposure, and translation exposure? An alternative arrangement for managing operating exposure between firms with a continuing buyer-supplier relationship is risk sharing. Explain how risk sharing works.
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