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AN ECONOMIC DEFINITION OF EXPOSURE TO EXCHANGE RATE GAINS OR LOSSES IS PRESENTED. IT IS SHOWN THAT THE SECTOR OF THE ECONOMY IN WHICH THE SUBSIDIARY OF A MULTINATIONAL CORPORATION OPERATES HAS FAR GREATER CONSEQUENCES FOR THE IMPACT OF INFLATION OR DEVALUATION ON THE FIRM'S DOLLAR VALUE THAN THE ACCOUNTING DEFINITION OF NET CURRENT ASSETS. THE IMPORTANCE OF DISTINGUISHING BETWEEN INCREASING AND DECREASING COST TECHNOLOGIES IN INVESTIGATING THE IMPACT OF INFLATION OR EXCHANGE-RATE CHANGES ON THE DIRECTION AND VOLUME OF TRADE IS UNDERLINED. THE EXISTENCE OF SIGNIFICANT ECONOMIES OF SCALE COULD LEAD TO UNANTICIPATED BALANCE-OF-PAYMENTS CONSEQUENCES. IT WILL BE INCREASINGLY IMPORTANT TO HOST GOVERNMENTS TO RECOGNIZE THE PRODUCTION AND THE INVESTMENT DECISIONS WHICH ARE LIKE CONSEQUENCES OF THEIR DOMESTIC ECONOMIC POLICIES. REFERENCES.

ANALYSES BASED ON AN EQUILIBRIUM CAPITAL-ASSET PRICING MODEL UNDER UNCERTAIN INFLATION, INDICATE THAT UNCERTAIN INFLATION AFFECTS THE COST OF CAPITAL OF A SPECIFIC PROJECT THROUGH THE MARKET PRICE OF RISK AND THE SYSTEMATIC RISK OF THE PROJECT, AND HENCE THE FIRM'S INVESTMENT DECISIONS. HOWEVER, IN THE ABSENCE OF CORPORATE INCOME-TAXES, THE MODIGLIANI-MILLER PROPOSITION ON CAPITAL STRUCTURE HOLDS EVEN UNDER UNCERTAIN INFLATION. THESE ANALYSES ALSO INDICATE THAT THE LEVERAGE FACTOR AFFECTS THE PREMIUM FOR A FIRM'S FINANCIAL RISK THROUGH THE COMPONENTS OF VARIABILITY AND INFLATION RISKS. CHART, REFERENCES.