Balance Sheet Effects in Colombian Non-Financial Firms
Adolfo Barajas (),
Sergio Restrepo (),
Roberto Steiner (),
Juan Camilo Medellín () and
César Pabón ()
WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO from FEDESARROLLO
After building up foreign currency denominated (FC) liabilities over several years, the balance sheets of Colombian firms might be particularly vulnerable to a shift in external conditions. We undertake four exercises in order to get a better understanding of these vulnerabilities. First, through probit/logit estimations we identify the firm-level and macroeconomic determinants of FC borrowing by non-financial corporations. Second, we investigate the implication of the balance sheet vulnerability for real activity. We find evidence of a FC balance sheet effect that transmits exchange rate fluctuations to firm-level investment, and show that this effect is asymmetric, much greater for depreciations than for appreciations. Third, using logit/probit estimations, we show that not all firms use forward exchange derivatives solely to hedge their FC liabilities. This might be a consequence of exchange rate intervention by the monetary authority, protecting against extreme exchange rate misalignments. Finally, we report results of a survey-based qualitative analysis on the hedging policies and activities of 12 large non-financial firms.
JEL-codes: E22 F31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000123:015228
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