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Financial Development, Exchange Rate Fluctuations and Debt Dollarization
A Firm-Level Evidence

by Minsuk Kim

Series:Working Paper No. 19/168
ISBN 9781513508979
Code: #WPIEA2019168

Publication year: 2019

Cdn: $27.00; US: $25.00
Language: English
42 pages
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This paper examines how financial development influences the debt dollarization of nonfinancial firms in a sample of emerging market economies (EMEs). The macroeconomic channels are identified from an optimal portfolio allocation model and assessed empirically using the accounting information of nonfinancial firms from 21 EMEs during 2009–2017. The results show that financial development, measured by the private credit-to-GDP ratio, mainly reduces the influence of exchange rate volatility in determining a firm's debt currency composition, among other channels. Furthermore, the effect of exchange rate volatility becomes statistically insignificant beyond an estimated threshold credit-to-GDP ratio of 100 percent.
Financial Development, Exchange Rate Fluctuations and Debt Dollarization
Cdn: $27.00; US: $25.00
International Monetary Fund (IMF) BookID: 125555 Added: 2019.8.2