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Currency mismatch and the sub-prime crisis: firm-level stylised facts from Hungary

  • Mariann Endrész

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Gyõzõ Gyöngyösi

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Péter Harasztosi

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

This 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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File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbfuzetek/WP_2012-8_final.pdf
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Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2012/8.

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Length: 54 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mnb:wpaper:2012/8
Contact details of provider: Web page: http://www.mnb.hu/

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  1. Galindo, Arturo & Izquierdo, Alejandro & Montero, Jose Manuel, 2007. "Real exchange rates, dollarization and industrial employment in Latin America," Emerging Markets Review, Elsevier, vol. 8(4), pages 284-298, December.
  2. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  3. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, November.
  4. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer, vol. 6(4), pages 459-472, November.
  5. Marcio M. Janot & Márcio G. P. Garcia & Walter Novaes, 2008. "Balance Sheet Effects in Currency Crises: Evidence from Brazil," Working Papers Series 162, Central Bank of Brazil, Research Department.
  6. Galindo, Arturo & Panizza, Ugo & Schiantarelli, Fabio, 2003. "Debt composition and balance sheet effects of currency depreciation: a summary of the micro evidence," Emerging Markets Review, Elsevier, vol. 4(4), pages 330-339, December.
  7. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  8. Romain Ranciere & Aaron Tornell & Athanasios Vamvakidis, 2010. "Currency mismatch, systemic risk and growth in emerging Europe," Economic Policy, CEPR;CES;MSH, vol. 25, pages 597-658, October.
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