Debt composition and balance sheet effects of exchange rate volatility in Mexico: a firm level analysis
AbstractWe use Mexican firm-level data to study the role of currency mismatches in exacerbating the negative effects of a devaluation in the corporate sector and to investigate what drives Mexican firms to borrow in foreign currency. Our results show that large firms and exporters tend to borrow more heavily in foreign currency. The presence of foreign currency denominated debt poses a significant risk to balance sheets at the time of devaluation. Our findings suggest that in Mexico, the balance sheet effects of a devaluation far outweigh the competitiveness effects.
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Bibliographic InfoArticle provided by Elsevier in its journal Emerging Markets Review.
Volume (Year): 4 (2003)
Issue (Month): 4 (December)
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Web page: http://www.elsevier.com/locate/inca/620356
Other versions of this item:
- Ignacio Lobato & Sangeeta Pratap & Alejandro Somuano, 2004. "Debt Composition and Balance Sheet Effects of Exchange Rate Volatility in Mexico: A Firm Level Analysis," Working Papers 0405, Centro de Investigacion Economica, ITAM.
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