Financial Development Exchange Rate Fluctuations And Debt Dollarization A Firm Level Evidence
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Author |
: Minsuk Kim |
Publisher |
: International Monetary Fund |
Total Pages |
: 42 |
Release |
: 2019-08-02 |
ISBN-10 |
: 9781513508979 |
ISBN-13 |
: 1513508970 |
Rating |
: 4/5 (79 Downloads) |
Synopsis Financial Development, Exchange Rate Fluctuations and Debt Dollarization: A Firm-Level Evidence by : Minsuk Kim
This paper examines how financial development influences the debt dollarization of nonfinancial firms in a sample of emerging market economies (EMEs). The macroeconomic channels are identified from an optimal portfolio allocation model and assessed empirically using the accounting information of nonfinancial firms from 21 EMEs during 2009–2017. The results show that financial development, measured by the private credit-to-GDP ratio, mainly reduces the influence of exchange rate volatility in determining a firm's debt currency composition, among other channels. Furthermore, the effect of exchange rate volatility becomes statistically insignificant beyond an estimated threshold credit-to-GDP ratio of 100 percent.
Author |
: Mr.Geoffrey J Bannister |
Publisher |
: International Monetary Fund |
Total Pages |
: 39 |
Release |
: 2018-09-11 |
ISBN-10 |
: 9781484376508 |
ISBN-13 |
: 1484376501 |
Rating |
: 4/5 (08 Downloads) |
Synopsis Dollarization and Financial Development by : Mr.Geoffrey J Bannister
Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.
Author |
: Minsuk Kim |
Publisher |
: International Monetary Fund |
Total Pages |
: 42 |
Release |
: 2019-08-02 |
ISBN-10 |
: 9781513511146 |
ISBN-13 |
: 1513511149 |
Rating |
: 4/5 (46 Downloads) |
Synopsis Financial Development, Exchange Rate Fluctuations and Debt Dollarization: A Firm-Level Evidence by : Minsuk Kim
This paper examines how financial development influences the debt dollarization of nonfinancial firms in a sample of emerging market economies (EMEs). The macroeconomic channels are identified from an optimal portfolio allocation model and assessed empirically using the accounting information of nonfinancial firms from 21 EMEs during 2009–2017. The results show that financial development, measured by the private credit-to-GDP ratio, mainly reduces the influence of exchange rate volatility in determining a firm's debt currency composition, among other channels. Furthermore, the effect of exchange rate volatility becomes statistically insignificant beyond an estimated threshold credit-to-GDP ratio of 100 percent.
Author |
: Mr.Ilhyock Shim |
Publisher |
: INTERNATIONAL MONETARY FUND |
Total Pages |
: 40 |
Release |
: 2020-12-11 |
ISBN-10 |
: 1513560948 |
ISBN-13 |
: 9781513560946 |
Rating |
: 4/5 (48 Downloads) |
Synopsis Exchange Rate Fluctuations and Firm Leverage by : Mr.Ilhyock Shim
We quantify the effect of exchange rate fluctuations on firm leverage. When home currency appreciates, firms who hold foreign currency debt and local currency assets observe higher net worth as appreciation lowers the value of their foreign currency debt. These firms can borrow more as a result and increase their leverage. When home currency depreciates, the reverse happens as firms have to de-lever with a negative shock to their balance sheets. Using firm-level data for leverage from 10 emerging market economies during the period from 2002 to 2015, we show that firms operating in countries whose non-financial sectors hold more of the debt in foreign currency, increase (decrease) their leverage relatively more after home currency appreciations (depreciations). Combining the leverage data with firm-level FX debt data for 4 emerging market countries, we further show that our results hold at the most granular level. Our quantitative results are asymmetric: the effects of depre-ciations, that are generally associated with sudden stops, are quantitatively larger than those of appreciations, which take place at a slower pace over time during capital inflow episodes. As our exercise compares depreciations and appreciations of similar size, these results are suggestive of financial frictions being more binding during depreciations than a possible relaxation of such frictions during appreciations.
Author |
: Kodjovi M. Eklou |
Publisher |
: International Monetary Fund |
Total Pages |
: 45 |
Release |
: 2023-05-26 |
ISBN-10 |
: 9798400243950 |
ISBN-13 |
: |
Rating |
: 4/5 (50 Downloads) |
Synopsis Dollar Exchange Rate Volatility and Productivity Growth in Emerging Markets: Evidence from Firm Level Data by : Kodjovi M. Eklou
This paper examines the impact of Dollar exchange rate volatility on firm productivity in Emerging Markets economies (EMs). Using firm level data covering 16 EMs over the period 1998 -2019, the paper shows that dollar exchange rate volatility reduces firm productivity growth. Exploring channels, its finds that the results are driven by countries with low level of financial development, high dollar invoicing, high bilateral trade with the US, high collective bargaining coverage and open capital account. Exploring the role of policy, it finds that Foreign Exchange Interventions (FXI) dampen this impact on firm productivty. Further, exploiting firm level data, the paper shows that dollar exchange rate volatility operates also through the financial friction channel, reducing contemporaneous investments, especially at firms with low liquidity buffers and weak balance sheet (high leverage). The role of financial frictions is confirmed through the finding that younger firms, more likely to face financial constraints, are also found to be more vulnerable to dollar exchange rate volatility. In addition, we also find evidence of a large and persistent effect on firms with highly irreversible investment, lending support for the real option channel of uncertainty on the dollar exchange rate. These findings are robust to a battery of tests, including controlling for uncertainty, financial crises and using an instrumental variable strategy exploiting US monetary policy shocks as an exogenous source of variation in dollar exchange rate volatility.
Author |
: Herman Kamil |
Publisher |
: International Monetary Fund |
Total Pages |
: 54 |
Release |
: 2012-03-01 |
ISBN-10 |
: 9781463939052 |
ISBN-13 |
: 1463939051 |
Rating |
: 4/5 (52 Downloads) |
Synopsis How Do Exchange Rate Regimes Affect Firms' Incentives to Hedge Currency Risk? Micro Evidence for Latin America by : Herman Kamil
Using a unique dataset with information on the currency composition of firms' assets and liabilities in six Latin-American countries, I investigate how the choice of exchange rate regime affects firms' foreign currency borrowing decisions and the associated currency mismatches in their balance sheets. I find that after countries switch from pegged to floating exchange rate regimes, firms reduce their levels of foreign currency exposures, in two ways. First, they reduce the share of debt contracted in foreign currency. Second, firms match more systematically their foreign currency liabilities with assets denominated in foreign currency and export revenues--effectively reducing their vulnerability to exchange rate shocks. More broadly, the study provides novel evidence on the impact of exchange rate regimes on the level of un-hedged foreign currency debt in the corporate sector and thus on aggregate financial stability.
Author |
: Mr.Juan S Corrales |
Publisher |
: International Monetary Fund |
Total Pages |
: 45 |
Release |
: 2019-01-22 |
ISBN-10 |
: 9781484395523 |
ISBN-13 |
: 1484395522 |
Rating |
: 4/5 (23 Downloads) |
Synopsis Financial Dollarization of Households and Firms: Does It Differ? by : Mr.Juan S Corrales
Using a newly complied and extended database from International Financial Statistics, and applying different panel-regression techniques, this paper documents the evolution of households’ and firms’ dollarization over the past decade. We assess the macroeconomic determinants of dollarization for households and firms and explore differences between high and low-income countries. We find that households’ and firms’ dollarization in loans and deposits are weakly explained by the currency substitution model, except in low income countries, where inflation plays a significant role. Instead, market development variables such as financial deepening, access to external debt and FX finance as well as other market considerations are key to explain the dynamics of deposits and loans dollarization, regardless of the level of income.These factors can account for a significant fraction of the dollarization, but using a variance decomposition model, there is evidence that a non-negligible portion has yet to be explained. This suggests that there are key determinants for household and firm dollarization that are not fully captured by traditional macroeconomic explanatory variables.
Author |
: Annamaria Kokenyne |
Publisher |
: International Monetary Fund |
Total Pages |
: 53 |
Release |
: 2010-08-01 |
ISBN-10 |
: 9781455201716 |
ISBN-13 |
: 1455201715 |
Rating |
: 4/5 (16 Downloads) |
Synopsis Dedollarization by : Annamaria Kokenyne
This paper provides a summary of the key policies that encourage dedollarization. It focuses on cases in which the authorities’ intention is to gain greater control of monetary policy and draws on the experiences of countries that have successfully dedollarized. Unlike previous work on the subject, this paper examines both macroeconomic stabilization policies and microeconomic measures, such as prudential regulation of the financial system. This study is also the first attempt to make extensive use of the foreign exchange regulation data reported in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. The main conclusion is that durable dedollarization depends on a credible disinflation plan and specific microeconomic measures.
Author |
: Ms. Elif C Arbatli Saxegaard |
Publisher |
: International Monetary Fund |
Total Pages |
: 69 |
Release |
: 2022-09-16 |
ISBN-10 |
: 9798400219948 |
ISBN-13 |
: |
Rating |
: 4/5 (48 Downloads) |
Synopsis U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data by : Ms. Elif C Arbatli Saxegaard
We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
Author |
: GASTON. SAHAY GELOS (RATNA.) |
Publisher |
: International Monetary Fund |
Total Pages |
: 2040 |
Release |
: 2023 |
ISBN-10 |
: 9798400211263 |
ISBN-13 |
: |
Rating |
: 4/5 (63 Downloads) |
Synopsis SHOCKS AND CAPITAL FLOWS by : GASTON. SAHAY GELOS (RATNA.)