The relationship between investment and large exchange rate depreciations in dollarized economies

Luis Carranza (), José Enrique Galdón Sánchez () and Javier Gómez Biscarri
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José Enrique Galdón Sánchez: Universidad Pública de Navarra
Authors registered in the RePEc Author Service: Jose Enrique Galdon-Sanchez ()

No 01/08, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: We use a simple financial friction in an economy with high degree of liability dollarization to show that the negative balance-sheet effect of an exchange rate depreciation may be observable only if the magnitude of the depreciation is large enough. This result justifies the difficulty to find strong empirical evidence for balance-sheet effects and suggests the convenience of including a "large depreciation" term in empirical analyses.

Keywords: 15 (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2008-05-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The relationship between investment and large exchange rate depreciations in dollarized economies (2011)
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