Financing decisions of firms and central bank policy
This paper aims to explain the sharp rise in unhedged foreign borrowing by South East Asian corporations in the few years prior to the crisis despite remarkably little change in fundamentals. The crucial element of our story is the strategic interaction between firms and the central bank, which gives rise to multiple equilibria: when firms use foreign borrowing, they raise the cost of devaluation to the central bank, which in turn makes foreign borrowing more attractive. Consequently, a small shock to fundamentals may have a large and permanent effect on the equilibrium composition of firms' borrowing.
|Date of creation:||01 Apr 2001|
|Contact details of provider:|| Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France|
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- Arturo Bris & Yrjö Koskinen & Vicente Pons, 2004.
"Corporate Financial Policies and Performance around Currency Crises,"
The Journal of Business,
University of Chicago Press, vol. 77(4), pages 749-796, October.
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- Arturo Bris & Yrjo Koskinen & Vicente Pons-Sanz, 2001. "Corporate Financial Policies and Performance Around Currency Crises," Yale School of Management Working Papers amz2563, Yale School of Management, revised 01 Oct 2008.
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- Roberto Chang & Andres Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," NBER Working Papers 7272, National Bureau of Economic Research, Inc.
- Roberto Chang & Andrés Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," Documentos de Trabajo 59, Centro de Economía Aplicada, Universidad de Chile.
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- Arturo Bris & Yrjo Koskinen, 2000. "Corporate Leverage And Currency Crises," Yale School of Management Working Papers ysm139, Yale School of Management, revised 01 Oct 2008.
- Bris, Arturo & Koskinen, Yrjö, 2000. "Corporate Leverage and Currency Crises," SSE/EFI Working Paper Series in Economics and Finance 367, Stockholm School of Economics, revised 02 Jul 2001.
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- Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
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- Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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