Financial fragility in emerging market countries: Firm balance sheets and the productive structure

Yannick Kalantzis

PSE Working Papers from HAL

Abstract: We build an overlapping generation model to study financial fragility in a two-sector small open economy. Firms are subject to a borrowing constraint and there is a currency mismatch in the balance sheets of the non-tradable sector. As a consequence, at a given point in time, multiple equilibria may arise, which makes self-fulfilling balance of payments crises possible. This state of financial fragility requires that firms producing non-tradable goods are sufficiently leveraged and that the relative size of the non-tradable sector is sufficiently large with regards to the tradable sector. We study under what conditions the endogenous evolution of these two structural factors, firm balance sheets and the productive structure, along an equilibrium path, eventually leads to a financially fragile state.

Keywords: balance of payments crises; financial fragility; foreign currency debt; borrowing constraint; multiple equilibria (search for similar items in EconPapers)
Date: 2005-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00590808v1
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://shs.hal.science/halshs-00590808v1/document (application/pdf)

Related works:
Working Paper: Financial fragility in emerging market countries: Firm balance sheets and the productive structure (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-00590808

Access Statistics for this paper

More papers in PSE Working Papers from HAL
Bibliographic data for series maintained by CCSD ().