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How Do Exchange Rate Regimes Affect Firms' Incentives to Hedge Currency Risk? Micro Evidence for Latin America, Herman Kamil

Using a unique dataset with information on the currency composition of firms' assets and liabilities in six Latin-American countries, I investigate how the choice of exchange rate regime affects firms' foreign currency borrowing decisions and the associated currency mismatches in their balance sheets. I find that after countries switch from pegged to floating exchange rate regimes, firms reduce their levels of foreign currency exposures, in two ways. First, they reduce the share of debt contracted in foreign currency. Second, firms match more systematically their foreign currency liabilities with assets denominated in foreign currency and export revenues--effectively reducing their vulnerability to exchange rate shocks. More broadly, the study provides novel evidence on the impact of exchange rate regimes on the level of un-hedged foreign currency debt in the corporate sector and thus on aggregate financial stability
Table Of Contents
Cover; Contents; I. Introduction; II. Theoretical Literature Review; III. Data Set and Basic Stylized Facts; A. The Firm-Level Dataset; Tables; 1. Number of Observations Used in Empirical Analyses; B. Exchange Rate Regimes; 2. Descriptive Statutes for Full Sample; Figures; 1. Cross Sectional Distribution of Dollar Debt Ratios Within Countries; 3. Exchange Rate Regimes and Measures of Exchange Rate Flexibility Within Regimes; C. A First Glance at the Data; 2. Dollarization of Liabilities of the Corporate Sector in Latin America; 3. Dollar Debt as a Share of National Currency Hedges
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (56 p.)
Specific Material Designation
Form Of Item

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