Determinants and consequences of foreign indebtedness in Colombian firms

During the nineties the performance of many emerging economies was linked to their access to foreign capital and its impact on the real exchange rate. Colombia was not an exception, as it experienced a sharp boom and bust cycle during the period. Although a number of studies have attempted to explai...

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Autores:
Echeverry Garzón, Juan Carlos
Fergusson Talero, Leopoldo
Steiner Sampedro, Roberto
Aguilar Londoño, Camila María
Tipo de recurso:
Work document
Fecha de publicación:
2003
Institución:
Universidad de los Andes
Repositorio:
Séneca: repositorio Uniandes
Idioma:
eng
OAI Identifier:
oai:repositorio.uniandes.edu.co:1992/8469
Acceso en línea:
http://hdl.handle.net/1992/8469
Palabra clave:
Colombia
Investment
Devaluation
Balance sheet effects
Deuda externa - Colombia
Empresas privadas - Aspectos económicos - Colombia
Inversiones - Aspectos económicos - Colombia
E22, F31
Rights
openAccess
License
http://creativecommons.org/licenses/by-nc-nd/4.0/
Description
Summary:During the nineties the performance of many emerging economies was linked to their access to foreign capital and its impact on the real exchange rate. Colombia was not an exception, as it experienced a sharp boom and bust cycle during the period. Although a number of studies have attempted to explain the recent underperformance of the Colombian economy, few attempts have been made at analyzing firm-level data. In this paper, we rely on information for a large sample of firms during 1995-2001 (nearly 8000 firms on average) and examine the determinants of foreign indebtedness as well as the effects on firm performance of holding dollar debt amid changes in the real exchange rate (i.e. the so called "balance sheet effect"). While size is the most robust determinant of dollar indebtedness, matching seems to take place, to the extent that firms in more open sectors and exporting firms have higher shares of dollar debt. In spite of the limited amount of dollar indebtedness of Colombian firms in general, our estimations suggest there is a negative balance sheet effect on firms' performance (i.e. on profitability). On the other hand, the interaction of dollar indebtedness with the real exchange rate is generally not significant in our investment regressions.