Foreign currency borrowing, balance sheet shocks, and real outcomes

Bryan Hardy

Journal of International Money and Finance, 2023, vol. 139, issue C

Abstract: This paper uses a unique dataset and improved identification to uncover several new aspects of foreign currency (FX) balance sheet shocks. First, shocked firms see a contraction in their FX loan borrowing, but large firms are able to replace the lost borrowing with local currency loans. Second, the cost of borrowing in FX increases for these firms, contributing to the shift away from FX credit. Third, larger banks are less sensitive in their FX lending to such shocks to their individual borrowers. Fourth, there are no real effects for large firms, but small firms see lower credit and profits, and decrease investment and employment of hourly workers.

Keywords: Balance sheet shocks; Borrowing constraints; Foreign currency debt; Bank lending; Investment (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 F44 G31 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Working Paper: Foreign currency borrowing, balance sheet shocks and real outcomes (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:139:y:2023:i:c:s0261560623001705

DOI: 10.1016/j.jimonfin.2023.102969

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