Corporate dollar debt and depreciations

BIS working paper provides a cross-country analysis


The BIS published a paper of Julian Caballero, who analyzed how exchange rate falls affect corporate balance. A firm that borrows in foreign currency is vulnerable to unexpected exchange rate movements if its currency exposures are not fully hedged operationally (eg the firm exports) or financially (eg with financial derivatives). A depreciation can weaken the firm's balance sheet and thus hinder investment. The paper studied such balance sheet effects in a sample of 15 emerging market economies (EMEs).

You can find the paper here.