Balance sheet effects in currency crises: Evidence from Brazil

Artikel

In third generation currency crises models, balance sheet losses from currency depreciations propagate the crises into the real sector of the economy. To test these models, we built a firm-level database that allowed us to measure currency mismatches around the 2002 Brazilian currency crisis. We found that between 2001 and 2003, firms with large currency mismatches just before the crisis reduced their investment rates 8.1 percentage points more than other publicly held firms. We also showed that the currency depreciation increased exporters revenue, but those with currency mismatches reduced investments 12.5 percentage points more than other exporters. These estimated reductions in investment are economically very significant, underscoring the importance of negative balance sheet effects in currency crises.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: EconomiA ; ISSN: 1517-7580 ; Volume: 22 ; Year: 2021 ; Issue: 1 ; Pages: 19-37 ; Amsterdam: Elsevier

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; International Lending and Debt Problems ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: Investment ; Currency mismatches ; Currency crises ; Hedge ; Financial constraints

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Janot, Marcio Magalhães ; Garcia, Márcio Gomes Pinto ; Novaes, Walter
• Event: Veröffentlichung
• (who): Elsevier
• (where): Amsterdam
• (when): 2021

Further information

• DOI: doi:10.1016/j.econ.2021.02.001
• Handle: http://hdl.handle.net/10419/266971
• Last update: 10.03.2025, 11:44 AM CET