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

Marianna Endresz, Gyozo Gyongyosi and Péter Harasztosi

No 2012/8, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: 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.

Keywords: currency mismatch; liability dollarisation; firm level data (search for similar items in EconPapers)
JEL-codes: F31 F34 G32 L25 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2012
New Economics Papers: this item is included in nep-ifn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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