Abstract
This paper establishes an imperfectly competitive model with Cobb-Douglas cost function to explore the exporting firm's foreign exchange rate exposure. The study finds that the substitution between exporting firm and foreign local firm and the ratio of material cost to total cost plays an important role in firm's exchange rate exposure: firm's exchange rate exposure will rise with the increasing exporting sale share in total sale, the substitution between exporting firm and foreign local firm and the ratio of material cost to total cost. In the empirical study, the model can explain over half of the industry condition with the data of Shenzhen stock market.
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