Empirical evidences show that Japan-based companies moved their major operations to the USA due to the currency appreciation of Japanese Yen in 1980s. However, the multinational firms moving their operations abroad still face both the risk of foreign price and the risk of foreign exchange rate. According to the purchasing power parity (PPP) and interest rate parity (IRP), the foreign exchange r...

Since the breakdown of the Bretton Woods System, exchange arrangements of countries have become flexible. Several attempts have been made to determine whether the theories of optimum currency areas adequately explain the choice of an exchange rate system. In this paper, the optimum currency area is retested. Using cross-section data, a regression analysis of the choice of an exchange rate syste...