How Do Exchange Rate Regimes Affect Firms' Incentives to Hedge Currency Risk? Micro Evidence for Latin America

Kamil, Herman

doi:10.5089/9781463939052.001

Cited by 40 publications

(36 citation statements)

References 71 publications

(72 reference statements)

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“…They find that the aggregate share of FX loans is positively related to interest rate differentials and domestic monetary volatility and negatively related to the volatility of the exchange rate. Work by Arteta (2005) on a broad sample of low-income countries, as well as Barajas and Morales (2003) and Kamil (2009) on Latin America, confirms the hypothesis that higher exchange rate volatility reduces credit dollarization.…”

Section: Banks' Sensitivity To Monetary Conditionsmentioning

confidence: 53%

Foreign banks and foreign currency lending in emerging Europe

Brown

Haas

2012

Economic Policy

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SUMMARYBased on survey data from 193 banks in 20 countries we provide the first bank-level analysis of the relationship between bank ownership, bank funding and foreign currency (FX) lending across emerging Europe. Our results contradict the widespread view that foreign banks have been driving FX lending to retail clients as a result of easier access to foreign wholesale funding. Our cross-sectional analysis shows that foreign banks do lend more in FX to corporate clients but not to households. Moreover, we find no evidence that wholesale funding had a strong causal effect on FX lending for either foreign or domestic banks. Panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in FX lending to households. However, this is driven by faster growth in household lending in general not by a shift towards FX lending.-Martin Brown and Ralph De Haas

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Section: Banks' Sensitivity To Monetary Conditionsmentioning

confidence: 53%

Foreign banks and foreign currency lending in emerging Europe

Brown

Haas

2012

Economic Policy

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“…The number of vulnerable firms (estimated in each specification of the model) as a share of the total _______ 12 The index ranges from 1 to 4 depending on the IMF's classification of the country in the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER). 13 See Kamil (2012). 14 See Kaminsky, Lizondo and Reinhardt (1998), and Berg and Pattillo (1998).…”

Section:  Buoyant Demand Conditions Lessen a Firm's Exposure To A Sumentioning

confidence: 99%

Nonfinancial Firms in Latin America: A Source of Vulnerability?

Gonzalez

2012

IMF Working Papers

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“…For 32 developed and developing countries, Calvo, Izquierdo and Mejía (2004) found that the interaction of large current account deficits and high dollarization may be a dangerous cocktail, as potential balance sheet effects become highly relevant in determining the probability of a Sudden Stop. For six Latin American countries, Kamil (2012) showed that fixed exchange rates may play a role in building up these vulnerabilities; after countries switch from pegged to floating exchange rates, firms reduced their foreign currency exposures.…”

Section: Introductionmentioning

confidence: 99%

Balance Sheet Effects in Colombian Non-Financial Firms

Barajas¹,

Restrepo²,

Steiner³

et al. 2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license. After building up foreign currency-denominated (FC) liabilities over several years, the balance sheets of Colombian firms might be particularly vulnerable to a shift in external conditions. This paper undertakes four exercises in order to get a better understanding of these vulnerabilities. First, probit/logit estimations are used to identify the firm-level and macroeconomic determinants of FC borrowing by non-financial corporations. Second, the implications of the balance sheet vulnerability for real activity are investigated. Evidence is found of an FC balance sheet effect that transmits exchange rate fluctuations to firm-level investment, and show that that this effect is asymmetric, much greater for depreciations than for appreciations. Third, using logit/probit estimations, it is shown that not all firms use forward exchange derivatives solely to hedge their FC liabilities. This might be a consequence of exchange rate intervention by the monetary authority, protecting against extreme exchange rate misalignments. Finally, results are reported of a survey-based qualitative analysis on the hedging policies and activities of 12 large non-financial firms. JEL classifications: E22, F31

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How Do Exchange Rate Regimes Affect Firms' Incentives to Hedge Currency Risk? Micro Evidence for Latin America

Cited by 40 publications

References 71 publications

Foreign banks and foreign currency lending in emerging Europe

Foreign banks and foreign currency lending in emerging Europe

Nonfinancial Firms in Latin America: A Source of Vulnerability?

Balance Sheet Effects in Colombian Non-Financial Firms

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