Currency Mismatches and Vulnerability to Exchange Rate Shocks: Nonfinancial Firms in Colombia
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
After building up foreign currency denominated (FC) liabilities over several years, Colombian firms might be vulnerable to a shift in external conditions. We undertake three empirical exercises to better understand these vulnerabilities. First, we identify the determinants of FC borrowing. Second, we investigate the implications for real activity, finding a balance sheet effect that transmits exchange rate fluctuations to investment and is asymmetric, much stronger for depreciations than for appreciations. Finally, we find that foreign exchange derivatives are not used solely for hedging, due in part to monetary authority intervention to smooth exchange rate volatility. However, a full explanation remains open for future research.
Series:
Working Paper No. 2017/263
Subject:
Depreciation Exchange rates Exports Financial regulation and supervision Financial statements Foreign exchange Hedging International trade National accounts Public financial management (PFM)
English
Publication Date:
November 22, 2017
ISBN/ISSN:
9781484330128/1018-5941
Stock No:
WPIEA2017263
Pages:
41
Please address any questions about this title to publications@imf.org