Show simple item record

dc.contributor.authorMartins, Betina Guimarães Dodsworth
dc.contributor.authorPinto, Rodrigo Ribeiro Antunes
dc.contributor.authorBonomo, Marco Antônio Cesar
dc.date.accessioned2008-05-13T15:25:09Z
dc.date.available2008-05-13T15:25:09Z
dc.date.issued2004-03-01
dc.identifier.issn0104-8910
dc.identifier.urihttp://hdl.handle.net/10438/491
dc.description.abstractIn this paper we study the interaction between macroeconomic environment and firms’ balance sheet effects in Brazil during the 1990’s. We start by assessing the influence of macroeconomic conditions on firms’ debt composition in Brazil. We found that larger firms tend to change debt currency composition more in response to a change in the exchange rate risk than small firms. We then proceed to investigate if and how exchange rate balance sheet effects affected the firms’ investment decisions. We test directly the exchange rate balance sheet effect on investment. Contrary to earlier findings (Bleakley and Cowan, 2002), we found that firms more indebted in foreign currency tend to invest less when there is an exchange rate devaluation. We tried different controls for the competitiveness effect. First, we control directly for the effect of the exchange rate on exports and imported inputs. We then pursue an alternative investigation strategy, inspired by the credit channel literature. According to this perspective, Tobin’s q can provide an adequate control for the competitiveness effect on investment. Our results provide supporting evidence for imperfect capital markets, and for a negative exchange rate balance sheet effect in Brazil. The results concerning the exchange rate balance sheet effect on investment are statistically significant and robust across the different specifications. We tested the results across different periods, classified according to the macroeconomic environment. Our findings suggest that the negative exchange rate balance sheet effect we found in the whole sample is due to the floating exchange rate period. We also found that exchange rate devaluations have important negative impact on both cash flows and sales of indebted firms. Furthermore, the impact of exchange rate variations is asymmetric, and the significant effect detected when no asymmetry is imposed is engendered by exchange rate devaluations.eng
dc.language.isoeng
dc.publisherEscola de Pós-Graduação em Economia da FGVpor
dc.relation.ispartofseriesEnsaios Econômicos;535por
dc.subjectInvestmenteng
dc.subjectBrazilpor
dc.subjectExchange ratepor
dc.subjectBalance sheet effectspor
dc.subjectCredit constraintspor
dc.titleDebt composition and exchange rate balance sheet effects in Brazil: a firm level analysiseng
dc.typeWorking Papereng
dc.subject.areaEconomiapor
dc.contributor.unidadefgvEscolas::EPGEpor
dc.subject.bibliodataEconomiapor
dc.subject.bibliodataCâmbiopor
dc.subject.bibliodataPolítica monetáriapor
dc.contributor.affiliationFGV


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record