Balance Sheet Effects in Colombian Non-Financial Firms

Adolfo Barajas, Sergio Restrepo-Ángel, Roberto Steiner, Juan Medellín and César Pabón

No 7936, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: 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. This paper undertakes four exercises in order to get a better understanding of these vulnerabilities. First, probit/logit estimations are used to identify the firm-level and macroeconomic determinants of FC borrowing by non-financial corporations. Second, the implications of the balance sheet vulnerability for real activity are investigated. Evidence is found of an FC balance sheet effect that transmits exchange rate fluctuations to firm-level investment, and show that that this effect is asymmetric, much greater for depreciations than for appreciations. Third, using logit/probit estimations, it is shown 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, results are reported of a survey-based qualitative analysis on the hedging policies and activities of 12 large non-financial firms.

Keywords: investment level; Foreign Currency Debt; Non-Financial Firms (search for similar items in EconPapers)
JEL-codes: E22 F31 (search for similar items in EconPapers)
Date: 2016-10
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://publications.iadb.org/publications/english ... -Financial-Firms.pdf (application/pdf)

Related works:
Working Paper: Balance Sheet Effects in Colombian Non-Financial Firms (2016)
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:idb:brikps:7936

DOI: 10.18235/0011769

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().