Balance Sheet Effects in Colombian Non-Financial Firms

Serie

• Working Papers Series. Documentos de Trabajo

Resumen

• 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.

autores

• Steiner, Roberto
• Barajas, Adolfo
• Medellin, Juan Camilo
• Pabón, César

fecha de publicación

• 2016-11

Área temática

• E22 - Inversión; Capital; Capital intangible; Capacidad
• F31 - Tipos de cambio

Enfoque geográfico

• Colombia  Country
• South America  Continent

Líneas de investigación

• Balance Sheet Effects
• Colombia
• Depreciation
• Dollar Debt

Issue

• 15228