Currency Mismatches And Vulnerability To Exchange Rate Shocks Nonfinancial Firms In Colombia

Download or read book Currency Mismatches and Vulnerability to Exchange Rate Shocks: Nonfinancial Firms in Colombia written by Mr.Adolfo Barajas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.