Cover IMF Working Papers
Currency Mismatches and Vulnerability to Exchange Rate Shocks: Nonfinancial Firms in Colombia
Author: Mr. Adolfo Barajas, Sergio Restrepo, Mr. Roberto Steiner, Juan Camilo Medellin, and Cesar Pabon
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 263
Language:
English
Publication Date:
22 Nov 2017
DOI:
https://doi.org/10.5089/9781484330128.001
ISBN:
9781484330128
ISSN:
1018-5941
Pages:
41
Keywords:
WP; FC debt; foreign currency; exchange rate; trade credit; Colombia; depreciation; balance sheet effects; exchange rate derivatives; balance sheet exposure; FC assets; debt issuance; Financial statements; Hedging; Exports; Exchange rates; Global
Legal-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.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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