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Nonfinancial Firms in Latin America

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  • Maria Gonzalez
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    Abstract

    We examine corporate sector vulnerabilities in Brazil, Chile, Colombia, Mexico and Peru. First, we identify stylized facts based on corporate financial indicators. Second, we assess vulnerability of individual firms to a sudden stop in financing through a probit model, using a panel of 18 countries in 2000-11. Results suggest that higher leverage and maturity exposures raise a firm’s probability to become exposed to a funding shock, while a larger firm size and buffers reduce it. Further, greater exchange rate flexibility can help mitigate corporate vulnerability. Identification of firms at risk through the model suggests that some vulnerabilities may be building in Latin America led by leverage, currency exposures and moderating buffers. These effects are partially offset, however, by a significant reduction in maturity exposures.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/279.

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    Length: 41
    Date of creation: 29 Nov 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/279

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    Related research

    Keywords: Corporate sector; Brazil; Chile; Colombia; Mexico; Peru; Latin America; Emerging markets; Economic models; Cross country analysis; External Vulnerability; Global Shocks; Leverage; Debt Structure; exchange rate; short-term debt; exchange rate regime; terms of trade; trade growth; exchange rate flexibility; domestic demand; real exchange rate; exchange rate regimes; wholesale trade; external financing; nominal exchange rate; exchange arrangements; exchange rate policy; exchange restrictions; oil prices; exchange rate depreciation; exchange rate policies; domestic market; net exporter; flexible exchange rate; currency appreciation; exchange rate arrangements; nominal exchange rate depreciation; flexible exchange rate regimes; bilateral real exchange rate; exchange rate pegs; currency risk; imported inputs; foreign exchange; exchange rate changes; balance of payments;

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Leandro Medina, 2012. "Spring Forward or Fall Back? The Post-Crisis Recovery of Firms," IMF Working Papers 12/292, International Monetary Fund.
    2. Kevin Cowan & Jose De Gregorio & Alejandro Micco & Christopher Neilson, 2007. "Financial Diversification, Sudden Stops and Sudden Starts," Working Papers Central Bank of Chile 423, Central Bank of Chile.
    3. Martinez, Lorenza & Werner, Alejandro, 2002. "The exchange rate regime and the currency composition of corporate debt: the Mexican experience," Journal of Development Economics, Elsevier, vol. 69(2), pages 315-334, December.
    4. Ricardo J. Caballero & Arvind Krishnamurthy, 2003. "Excessive Dollar Debt: Financial Development and Underinsurance," Journal of Finance, American Finance Association, vol. 58(2), pages 867-894, 04.
    5. Parsley, David C. & Popper, Helen A., 2006. "Exchange rate pegs and foreign exchange exposure in East and South East Asia," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 992-1009, October.
    6. Papa M'B. P. N'Diaye & Dale F. Gray & Natalia T. Tamirisa & Hiroko Oura & Qianying Chen, 2010. "International Transmission of Bank and Corporate Distress," IMF Working Papers 10/124, International Monetary Fund.
    7. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
    8. Coricelli, Fabrizio & Driffield, Nigel & Pal, Sarmistha & Roland, Isabelle, 2010. "Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?," IZA Discussion Papers 4834, Institute for the Study of Labor (IZA).
    9. Claessens, Stijn & Tong, Hui & Wei, Shang-Jin, 2012. "From the financial crisis to the real economy: Using firm-level data to identify transmission channels," Journal of International Economics, Elsevier, vol. 88(2), pages 375-387.
    10. Patnaik, Ila & Shah, Ajay, 2008. "Does the currency regime shape unhedged currency exposure," Working Papers 08/50, National Institute of Public Finance and Policy.
    11. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
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