Corporate foreign currency borrowing and investment: The case of Hungary

Marianna Endresz and Péter Harasztosi

Emerging Markets Review, 2014, vol. 21, issue C, 265-287

Abstract: The paper investigates the impact of foreign currency lending on investment. Using Hungarian firm level data, we test whether foreign currency lending contributed to larger investment before the crisis and whether the depreciation during the Great Recession resulted in lower investment rate for firms with foreign currency loans. Results of OLS and matching estimations show that before the crisis FX lending increased investment rates and during the crisis the investment rate of firms with FX loans declined more because of the balance sheet effects triggered by the depreciation. These effects were found to be more pronounced for liquidity constrained firms.

Keywords: Liability dollarization; Currency mismatch; Investment; Balance sheet effects; Liquidity constraints (search for similar items in EconPapers)
JEL-codes: E44 G01 G31 G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Corporate Foreign Currency Borrowing and Investment. The Case of Hungary (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:21:y:2014:i:c:p:265-287

DOI: 10.1016/j.ememar.2014.09.003

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