Currency crises and financial vulnerability in dollarized economies.
详细信息
文摘
The dissertation consists of three distinct chapters that contribute to important, yet unresolved topics in Macroeconomics and International Economics. Macroeconomists have been keenly interested in understanding how financial crisis turn into real recessions in emerging markets. By using a unique data set for 1,300 listed firms from six Latin American countries, the first chapter co-authored with Sebnem Kalemli-Ozcan and Carolina Villegas-Sanchez) provides systematic evidence on the key channel behind the contractionary nature of financial crises. Using a differences-in-differences methodology, we disentangle the role played by banks credit crunch and firms balance sheet currency mismatches in firms investment behavior in the aftermath of steep devaluations. Our results suggest that the key factor hindering investment and growth in the aftermath of financial crises is the decline in the supply of credit. Economists and policymakers have also been interested in response of exchanges rates to central bank intervention in foreign exchange markets. The second chapter considers the recent experience of Colombia between 2004 and 2007, and examines the effectiveness of central bank intervention in stemming domestic currency appreciation under an inflation-targeting regime. The results indicate that the combination of peso-weakening interventions and expansionary monetary policy between 2004 and 2006 seem to have led to a reduction in appreciation pressures. In contrast, sterilized intervention was ineffective in stemming domestic currency appreciation during 2007, as large-scale intervention was working against a backdrop of intense monetary tightening. The third chapter co-authored with Sebastian Auguste, Kathryn Dominguez and Linda Tesar) explores the ways in which cross-border financial markets are used to circumvent capital controls. We study the recent experience of investors in Argentina who while subject to capital controls, were able to purchase cross-listed shares using local currency, convert them into dollar-denominated shares, re-sell them abroad, and deposit the dollar proceeds in foreign bank accounts. We find that capital controls drive a wedge between the price of local shares and their corresponding cross-listed shares. This wedge provides an implicit devaluation forecast and the markets valuation of capital control circumvention.