Granular Corporate Hedging Under Dominant Currency

Laura Alfaro, Mauricio Calani and Liliana Varela

No 28910, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows that, in a world dominated by vehicle currencies, firms engaging in international operations retain currency risk and hedge it real and financially. We employ a unique dataset covering the universe of trade credit, international trade, foreign currency debt, and FX derivatives contracts with firms’ census data in Chile (2005-2018). We document that operational hedging is quantitatively limited, as different maturity, frequency, and amount of FX operations make it difficult to net these exposures. The granular firms complement real hedging using FX financial instruments, which improve their cash flow management and promote their trade and growth.

JEL-codes: F31 F38 G30 G38 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-cwa, nep-ifn, nep-opm and nep-rmg
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Related works:
Working Paper: Granular Corporate Hedging Under Dominant Currency (2023)
Working Paper: Granular Corporate Hedging Under Dominant Currency (2021)
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