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Currency Mismatches in Non-Financial Firms in Chile

  • Kevin Cowan L.
  • Erwin Hansen S.
  • Luis Óscar Herrera B.

Using a new data base that includes the currency composition of assets and liabilities of non-financial firms, this paper examines the effects and determinants of currency mismatches in Chile. In line with previous studies, we find that after a depreciation in real terms, firms with the largest debt in dollars perform no worse than their counterparts indebted in pesos. Nonetheless, once we control properly by differences across firms in the currency composition of their assets, income and use of derivatives, significant balance sheet effects arise.

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File URL: http://www.bcentral.cl/estudios/revista-economia/2005/ago/Vol8N2ago2005pp57_82.pdf
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Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 8 (2005)
Issue (Month): 2 (August)
Pages: 57-82

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Handle: RePEc:chb:bcchec:v:8:y:2005:i:2:p:57-82
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  1. Jose De Gregorio & Sebastian Edwards & Rodrigo O. Valdes, 2000. "Controls on Capital Inflows: Do they Work?," NBER Working Papers 7645, National Bureau of Economic Research, Inc.
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  4. Eduardo Levy Yeyati & Federico Sturzenegger & Iliana Reggio, 2002. "On the Endogeneity of Exchange Rate Regimes," Business School Working Papers veintiuno, Universidad Torcuato Di Tella.
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  8. Benavente, Jose Miguel & Johnson, Christian A. & Morande, Felipe G., 2003. "Debt composition and balance sheet effects of exchange rate depreciations: a firm-level analysis for Chile," Emerging Markets Review, Elsevier, vol. 4(4), pages 397-416, December.
  9. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. " Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-58, December.
  10. Allayannis, George & Weston, James P, 2001. "The Use of Foreign Currency Derivatives and Firm Market Value," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 243-76.
  11. Geczy, Christopher & Minton, Bernadette A & Schrand, Catherine, 1997. " Why Firms Use Currency Derivatives," Journal of Finance, American Finance Association, vol. 52(4), pages 1323-54, September.
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  15. Allayannis, George & Brown, Gregory W. & Klapper, Leora F., 2001. "Exchange rate risk management : evidence from East Asia," Policy Research Working Paper Series 2606, The World Bank.
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