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Balance-Sheet Effects of Exchange Rate Depreciation: Evidence from Non-Financial Firms in Indonesia

Author

Listed:
  • Sahminan

    (Bank Indonesia)

Abstract

The effect of exchange rate depreciation on the balance-sheet of non-financial firms has been a major issue in international finance. In this paper we test and estimate the balance sheet effects of exchange rate depreciation in non-financial firms in Indonesia. Using a sample of publicly traded non-financial firms in The Jakarta Stock Exchange (JSX) we found that in the investment in current assets, the balance-sheet-effect of the exchange rate depreciation dominates its competitiveness effect. On the other hand, the presence of balance-sheet effect is not significant in the investment in inventories.

Suggested Citation

  • Sahminan, 2006. "Balance-Sheet Effects of Exchange Rate Depreciation: Evidence from Non-Financial Firms in Indonesia," Working Papers WP/6/2009, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp62006
    as

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    File URL: http://publication-bi.org/repec/idn/wpaper/WP62006.pdf
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    References listed on IDEAS

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    1. Bonomo, Marco & Martins, Betina & Pinto, Rodrigo, 2003. "Debt composition and exchange rate balance sheet effect in Brazil: a firm level analysis," Emerging Markets Review, Elsevier, vol. 4(4), pages 368-396, December.
    2. Hoyt Bleakley & Kevin Cowan, 2008. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 612-626, November.
    3. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
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    Cited by:

    1. Fakhri J. Hasanov & Nigar Bayramli & Nayef Al-Musehel, 2018. "Bank-Specific and Macroeconomic Determinants of Bank Profitability: Evidence from an Oil-Dependent Economy," IJFS, MDPI, vol. 6(3), pages 1-21, September.
    2. Sahminan, Sahminan, 2006. "Adjustments of the Non-Financial Sector to the Rise in Exchange Rate Volatility and Their Policy Implications in Indonesia," MPRA Paper 95471, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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