Currency depreciations, financial transfers, and firm heterogeneity

Michael Brei and Matthieu Charpe

Emerging Markets Review, 2012, vol. 13, issue 1, 26-41

Abstract: The present paper investigates five episodes of currency collapse from the perspective of non-financial firms operating in Argentina, Brazil and Mexico. We focus on two aspects: wealth and income transfers from borrowing firms to lenders and firm heterogeneity. At the firm level, we find that the currency collapses are preceded and associated with sharply rising financial transfers from firms to lenders. The debt and income structure is central in explaining the asymmetric firm dynamics. Most affected are firms with high levels of unhedged foreign-currency debt. At the country level, Argentina, Brazil, and Mexico display three contrasting examples. Argentina has a large currency mismatch, Brazil balances the currency denomination of debt and income (natural hedge), and Mexico occupies an intermediate position.

Keywords: Currency crises; Income distribution (search for similar items in EconPapers)
JEL-codes: E25 E60 F34 F41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Working Paper: Currency Depreciations, Financial Transfers, and Firm Heterogeneity (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:13:y:2012:i:1:p:26-41

DOI: 10.1016/j.ememar.2011.09.003

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