From carry trades to trade credit: financial intermediation by non-financial corporations
Bryan Hardy and
Felipe Saffie ()
No 773, BIS Working Papers from Bank for International Settlements
We use unique firm level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency and lending in domestic currency, largely to related partners (trade credit), accumulating currency risk in the process. The interest rate differential between local and foreign currency borrowing largely drives this behavior at a quarterly frequency, inducing an expansion in gross trade credit and sales. Firms that were active in carry-trade have decreased investment following a large depreciation, independent of currency exposure levels and export status, but maintain their supply of trade credit.
Keywords: emerging market corporate debt; currency mismatch; liability dollarization; carry trades; trade credit (search for similar items in EconPapers)
JEL-codes: E44 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bis.org/publ/work773.pdf Full PDF document (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:773
Access Statistics for this paper
More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Christian Beslmeisl ().