Financial Development Exchange Rate Fluctuations And Debt Dollarization A Firm Level Evidence

Author : Minsuk Kim
Publisher : International Monetary Fund
Page : 42 pages
File Size : 41,7 Mb
Release : 2019-08-02
Category : Business & Economics
ISBN : 9781513508979

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Financial Development, Exchange Rate Fluctuations and Debt Dollarization: A Firm-Level Evidence by Minsuk Kim Pdf

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,Mr.Jarkko Turunen,Malin Gardberg
Publisher : International Monetary Fund
Page : 39 pages
File Size : 46,9 Mb
Release : 2018-09-11
Category : Business & Economics
ISBN : 9781484376508

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Dollarization and Financial Development by Mr.Geoffrey J Bannister,Mr.Jarkko Turunen,Malin Gardberg Pdf

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 : Mr.Ilhyock Shim,Sebnem Kalemli-Ozcan,Xiaoxi Liu
Publisher : INTERNATIONAL MONETARY FUND
Page : 40 pages
File Size : 55,7 Mb
Release : 2020-12-11
Category : Business & Economics
ISBN : 1513560948

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Exchange Rate Fluctuations and Firm Leverage by Mr.Ilhyock Shim,Sebnem Kalemli-Ozcan,Xiaoxi Liu Pdf

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 : Ms. Elif C Arbatli Saxegaard,Melih Firat,Davide Furceri,Jeanne Verrier
Publisher : International Monetary Fund
Page : 69 pages
File Size : 55,5 Mb
Release : 2022-09-16
Category : Business & Economics
ISBN : 9798400219948

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U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data by Ms. Elif C Arbatli Saxegaard,Melih Firat,Davide Furceri,Jeanne Verrier Pdf

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
Page : 2040 pages
File Size : 44,5 Mb
Release : 2023
Category : Electronic
ISBN : 9798400211263

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SHOCKS AND CAPITAL FLOWS by GASTON. SAHAY GELOS (RATNA.) Pdf

Author : Mr.Harald Finger,Pablo Lopez Murphy
Publisher : International Monetary Fund
Page : 76 pages
File Size : 48,5 Mb
Release : 2019-10-22
Category : Business & Economics
ISBN : 9781513512334

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Facing the Tides by Mr.Harald Finger,Pablo Lopez Murphy Pdf

This paper looks empirically at some economic effects of volatile exchange rates and financial conditions and examines policy responses for managing such volatility. It also sheds light on some economic costs that stem from volatile capital flows and exchange rates and analyzes how countries deploy their policy toolkits in response. The data-driven analysis should contribute to ongoing reflections about how to manage volatile capital flows and exchange rates both in Asian EMEs and more broadly.

Author : Mr. Philippe D Karam,Mikhail Pranovich,Mr. Jan Vlcek
Publisher : International Monetary Fund
Page : 45 pages
File Size : 42,9 Mb
Release : 2021-10-22
Category : Business & Economics
ISBN : 9781589068711

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An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines by Mr. Philippe D Karam,Mikhail Pranovich,Mr. Jan Vlcek Pdf

We extend a modern practical Quarterly Projection Model to study credit cycle dynamics and risks, focusing on macrofinancial linkages and the role of macroprudential policy in achieving economic and financial stability. We tailor the model to the Philippines and evaluate the model’s properties along several dimensions. The model produces plausible dynamics and sensible forecasts. This along with its simplicity makes it useful for policy analysis. In particular, it should help policymakers understand the quantitative implications of responding to changes in domestic financial conditions, along with other shocks, through the joint use of macroprudential and monetary policies.

Author : Mr.Eduardo Borensztein,Mr.Andrew Berg
Publisher : International Monetary Fund
Page : 28 pages
File Size : 44,9 Mb
Release : 2000-12-20
Category : Business & Economics
ISBN : 1557759936

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Full Dollarization by Mr.Eduardo Borensztein,Mr.Andrew Berg Pdf

Analyzes the costs and benefits of full dollarization, or the adoption by one country of another country’s currency. Potential advantages include lower borrowing costs and deeper integration into world markets. But countries lose the ability to devalue, and become dependent on the U.S. Compares with currency board option.

Author : Mr. Marco Airaudo
Publisher : International Monetary Fund
Page : 65 pages
File Size : 45,9 Mb
Release : 2016-03-08
Category : Business & Economics
ISBN : 9781475523164

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Inflation Targeting and Exchange Rate Management In Less Developed Countries by Mr. Marco Airaudo Pdf

We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.

Author : Mr.Romain Veyrune,Annamaria Kokenyne,Mr.Jeremy Ley
Publisher : International Monetary Fund
Page : 52 pages
File Size : 48,7 Mb
Release : 2010-08-01
Category : Business & Economics
ISBN : 9781455202225

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Dedollarization by Mr.Romain Veyrune,Annamaria Kokenyne,Mr.Jeremy Ley Pdf

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 : Steve Brito,Mr.Nicolas E Magud,Mr.Sebastian Sosa
Publisher : International Monetary Fund
Page : 21 pages
File Size : 49,8 Mb
Release : 2018-05-10
Category : Business & Economics
ISBN : 9781484356340

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Real Exchange Rates, Economic Complexity, and Investment by Steve Brito,Mr.Nicolas E Magud,Mr.Sebastian Sosa Pdf

We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms.

Author : Mr.Mauro Mecagni,Mr.Juan S Corrales,Mr.Jemma Dridi,Mr.Rodrigo Garcia-Verdu,Patrick A. Imam,Mr.Justin Matz,Ms.Carla Macario,Mr.Rodolfo Maino,Mr.Yibin Mu,Ashwin Moheeput,Mr.Futoshi Narita,Mr.Marco Pani,Mr.Manuel Rosales Torres,Mr.Sebastian Weber,Mr.Etienne B Yehoue
Publisher : International Monetary Fund
Page : 75 pages
File Size : 55,6 Mb
Release : 2015-05-15
Category : Business & Economics
ISBN : 9781498368476

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Dollarization in Sub-Saharan Africa by Mr.Mauro Mecagni,Mr.Juan S Corrales,Mr.Jemma Dridi,Mr.Rodrigo Garcia-Verdu,Patrick A. Imam,Mr.Justin Matz,Ms.Carla Macario,Mr.Rodolfo Maino,Mr.Yibin Mu,Ashwin Moheeput,Mr.Futoshi Narita,Mr.Marco Pani,Mr.Manuel Rosales Torres,Mr.Sebastian Weber,Mr.Etienne B Yehoue Pdf

Dollarization—the use of foreign currencies as a medium of exchange, store of value, or unit of account—is a notable feature of financial development under macroeconomically fragile conditions. It has emerged as a key factor explaining vulnerabilities and currency crises, which have long been observed in Latin America, parts of Asia, and Eastern Europe. Dollarization is also present, prominently, in sub-Saharan Africa (SSA) where it remains significant and persistent at over 30 percent rates for both bank loans and deposits—although it has not increased significantly since 2001. However, progress in reducing dollarization has lagged behind other regions and, in this regard, it is legitimate to ask whether this phenomenon is an important concern in SSA. This study fills a gap in the literature by analyzing these issues with specific reference to the SSA region on the basis of the evidence for the past decade.

Author : Mr.Stijn Claessens,Mr.Ayhan Kose
Publisher : International Monetary Fund
Page : 66 pages
File Size : 44,6 Mb
Release : 2013-01-30
Category : Business & Economics
ISBN : 9781475561005

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Financial Crises Explanations, Types, and Implications by Mr.Stijn Claessens,Mr.Ayhan Kose Pdf

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

Author : Sebastian Edwards
Publisher : University of Chicago Press
Page : 699 pages
File Size : 42,8 Mb
Release : 2009-02-15
Category : Business & Economics
ISBN : 9780226184999

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Capital Controls and Capital Flows in Emerging Economies by Sebastian Edwards Pdf

Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. In Capital Controls and Capital Flows in Emerging Economies, an esteemed group of contributors examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.

Author : Eduardo Levy Yeyati,Federico Sturzenegger
Publisher : MIT Press
Page : 364 pages
File Size : 40,5 Mb
Release : 2003
Category : Business & Economics
ISBN : 0262122502

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Dollarization by Eduardo Levy Yeyati,Federico Sturzenegger Pdf

Theoretical and empirical analysis of de jure dollarization. With the persistent instability of international financial markets, emerging economies are exploring new ways to reduce exposure to capital flow volatility. Some analysts argue that financially open economies are best served by more flexible regimes, while others argue in favor of extreme exchange rate regimes that have a strong commitment to a fixed parity or dispense with an independent currency. The successful launch of the euro has made more realistic the prospect of replacing a national currency with a strong foreign one. Recent examples include the adoption of the US dollar by Ecuador and El Salvador. The introduction of a foreign currency as sole legal tender, termed full (de jure) dollarization, has been the center of much political and academic debate. This book provides a comprehensive analysis of the issues from both theoretical and empirical perspectives. The topics discussed include the role of balance sheet effects, the linkage between currency risk and country risk, the impact of dollarization on trade, financial integration and credibility, the implications of dollarization for the lender of last resort, and the institutional and political economy aspects of dollarization.