What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?

Sebnem Kalemli-Ozcan, Herman Kamil and Carolina Villegas-Sanchez ()
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Herman Kamil: Ministry of Finance, Uruguay

The Review of Economics and Statistics, 2016, vol. 98, issue 4, 756-769

Abstract: We quantify the effects of lending and balance sheet channels on corporate investment during large devaluations. We find that if currency crises are accompanied by banking crises, domestic exporters holding unhedged foreign currency debt decrease investment while foreign exporters with better access to credit increase investment despite their unhedged foreign currency debt. We do not find such a differential effect under pure currency crises. Using firm-bank matched data during the global financial crisis, we showthat both domestic and foreign-owned firms experienced a decline in bank credit from affected banks; however, foreign-owned firms substituted the lost credit.

Keywords: Foreign ownership; twin crises; exports; short-term dollar debt; investment (search for similar items in EconPapers)
JEL-codes: E32 F15 F36 O16 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (67)

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Related works:
Working Paper: What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks? (2011)
Working Paper: What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks? (2010)
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