Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173843
Authors: 
Álvarez Espinoza, Roberto
Hansen, Erwin
Year of Publication: 
2017
Series/Report no.: 
IDB Working Paper Series IDB-WP-769
Abstract: 
This paper examines a panel (1994-2014) of Chilean non-financial firms, both publicly listed and private, which was built to analyze the determinants of the use of foreign currency debt and their potential consequences for firm investment and profitability. It is found that foreign assets and the use of FX derivatives are positively associated with firms' use of foreign currency debt. Also, depending on the estimation method, exports appear as an important determinant of the use of foreign currency debt. In terms of the potential effect of holding foreign currency debt on firms' performance after an exchange rate devaluation, no statistical differential effect is identified on either firm profitability or firm investment. This (lack of) result is interpreted as evidence that firms match liabilities and assets denominated in foreign currency and that firms actively involved in hedging aim to reduce their exposure to foreign exchange fluctuations.
Subjects: 
Foreign currency debt
Currency mismatch
Balance sheet effect
Chile
JEL: 
F34
G31
E22
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode
Document Type: 
Working Paper
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