Finantial dollarization and debt deflation under a currency board

In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we fin...

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Autores principales: Levy Yeyati, Eduardo, Galiani, Sebastián, Schargrodsky, Ernesto Santiago
Formato: Documento de trabajo acceptedVersion
Publicado: Universidad Torcuato Di Tella. Escuela de Negocios. Centro de Investigaciones en Finanzas (CIF) 2017
Materias:
Convertibilidad
Deflación
Deuda
Acceso en línea:http://repositorio.utdt.edu/handle/utdt/6257
Aporte de:
Repositorio Digital Universidad Torcuato Di Tella de Universidad Torcuato Di Tella
id I57-R16320.500.13098-6257
record_format dspace
institution Universidad Torcuato Di Tella
institution_str I-57
repository_str R-163
collection Repositorio Digital Universidad Torcuato Di Tella
topic Convertibilidad
Deflación
Deuda
spellingShingle Convertibilidad
Deflación
Deuda
Levy Yeyati, Eduardo
Galiani, Sebastián
Schargrodsky, Ernesto Santiago
Finantial dollarization and debt deflation under a currency board
description In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization, and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.
format Documento de trabajo
acceptedVersion
author Levy Yeyati, Eduardo
Galiani, Sebastián
Schargrodsky, Ernesto Santiago
author_facet Levy Yeyati, Eduardo
Galiani, Sebastián
Schargrodsky, Ernesto Santiago
author_sort Levy Yeyati, Eduardo
title Finantial dollarization and debt deflation under a currency board
title_short Finantial dollarization and debt deflation under a currency board
title_full Finantial dollarization and debt deflation under a currency board
title_fullStr Finantial dollarization and debt deflation under a currency board
title_full_unstemmed Finantial dollarization and debt deflation under a currency board
title_sort finantial dollarization and debt deflation under a currency board
publisher Universidad Torcuato Di Tella. Escuela de Negocios. Centro de Investigaciones en Finanzas (CIF)
publishDate 2017
url http://repositorio.utdt.edu/handle/utdt/6257
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AT galianisebastian finantialdollarizationanddebtdeflationunderacurrencyboard
AT schargrodskyernestosantiago finantialdollarizationanddebtdeflationunderacurrencyboard
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