Balance Sheets and Exchange Rate Policy

Céspedes, Luis Felipe; Chang, Roberto; Velasco, Andrés

doi:10.3386/w7840

Cited by 257 publications

(295 citation statements)

References 24 publications

(25 reference statements)

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“…Indeed, a high level of foreign currency-denominated debt can hamper growth, in particular in developing countries, through balance sheets effects (Calvo and Reinhart, 2001;Céspedes et al, 2004). The underlying mechanism is the following: a domestic currency depreciation considerably increases foreign currency-denominated debt burdens, leading thus to a decrease in firms' production mainly because of corporate financial distress, absence of trade credit and increasing costs of imported inputs and goods.…”

Section: The Issue Of Transmission Channelsmentioning

confidence: 98%

Revisiting the nexus between currency misalignments and growth in the CFA Zone

Grekou

2015

Economic Modelling

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a b s t r a c t a r t i c l e i n f o In this paper, we revisit the link between currency misalignments and economic growth by taking into account foreign currency-denominated debt dynamics for the CFA zone countries over the period 1985-2011. Relying on a BEER approach and using panel cointegration techniques, we first derive currency misalignments. We then estimate a panel smooth transition growth equation that allows currency misalignment to exert nonlinear impacts on both economic growth and foreign currency-denominated debt dynamics. We find that the nonlinear impact of currency misalignments on growth through the competitiveness channel is mitigated by the foreign currencydenominated debt dynamics through a valuation effect.

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Section: The Issue Of Transmission Channelsmentioning

confidence: 98%

Revisiting the nexus between currency misalignments and growth in the CFA Zone

Grekou

2015

Economic Modelling

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“…An alternative approach, followed byCéspedes et al (2003Céspedes et al ( , 2004,Elekdag et al (2006), andGertler et al (2007), is to assume that firms borrow directly on world capital markets. 27 It could also be assumed, as in, that banks lend to domestic firms in foreign currency as well.…”

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confidence: 98%

Monetary Policy Analysis in a Small Open Credit-Based Economy

Agénor

Montiel

2008

Open Econ Rev

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“…For example, Céspedes et al (2004) illustrates the balance sheet effect in a setting with constant exports. One way of interpreting this assumption is that the expansionary effect of a real depreciation on exports of final products may be offset by other negative shocks, such as a negative commodity shock.…”

Section: Potential Balance-sheet Effects and Trade-off For The Centramentioning

confidence: 99%

“…Krugman (1999);Aghion, Bacchetta, and Banerjee (2004);Céspedes et al (2004);Eichengreen and Hausmann (1999). Bahmani-Oskooee and Miteza(2003)assess the empirical evidence on whether devaluations are expansionary or contractionary.…”

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confidence: 99%