Currency mismatch and the sub-prime crisis: firm-level stylised facts from Hungary
AbstractThis paper investigates currency mismatch in the Hungarian corporate sector. Using a novel dataset on non-financial firms we first identify firms with mismatch, measure their weight in the economy and show their main characteristics. We then analyze the performance of firms during the crisis. We find that a significant share of firms with FX debt had no natural hedge, i.e. no FX revenues from exports. The firms exposed to currency mismatch had a sizeable share both in real aggregates and on the loan market before the crisis. Firms with currency mismatch tended to be larger and more indebted, which suggests that FX borrowing might have eased their liquidity constraint before the crisis. During the crisis balance sheet effects were likely to be triggered by the large depreciations. Firms with FX loans had a larger fall in investment, and were more likely to go bankrupt. Their deteriorating performance and the reassessment of holding FX debt both by banks and firms led to major changes on the loan market. FX lending became less popular, and firms with mismatch were less likely to get new loans.
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Bibliographic InfoPaper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2012/8.
Length: 54 pages
Date of creation: 2012
Date of revision:
currency mismatch; liability dollarisation; firm level data;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-IFN-2013-01-19 (International Finance)
- NEP-TRA-2013-01-19 (Transition Economics)
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