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

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Central banks often buy or sell reserves-–-so called FX interventions (FXIs)---to dampen sharp exchange rate movements caused by volatile capital flows. At the same time, these interventions may entail unintended side effects. In this paper, we investigate whether FXIs incentivize firms to take on more unhedged FX debt, thereby increasing medium-term corporate vulnerabilities. Using a novel dataset with close to 5,000 nonfinancial firms across 19 emerging markets covering 2002--2017, we find that the firm-level share of FX debt rises following intensive use of FXIs, particularly for non-exporting firms in shallow financial markets with no FX debt to begin with. The magnitude of this effect is economically significant, with one standard deviation increase in FXI leading to an average 2 percentage points increase in the FX debt share. For reference, the median share of FX debt in the sample is zero.

United States --- Foreign Exchange --- Money and Monetary Policy --- International Lending and Debt Problems --- Portfolio Choice --- Investment Decisions --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Monetary economics --- Exchange rate arrangements --- Exchange rates --- Currencies --- Exchange rate flexibility --- Money

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Balance sheet recessions have been a drag on activity after the Global Financial Crisis, underscoring the important role of balance sheet adjustment for resuming sustained growth. In this paper we examine private sector deleveraging experiences across 36 advanced and emerging economies countries since 1960. We consider the common features and divergent experiences of deleveraging episodes across countries, and analyze empirically the impact of different aspects of deleveraging during the bust phase of leverage cycles on subsequent medium-term growth. The results suggest that larger and quicker unwinding of non-financial sector debt overhangs is associated with sizable medium-term output gains, and that policies should focus on facilitating up-front balance sheet adjustment.

Financial leverage. --- Financial statements. --- Business cycles. --- Economic development. --- Economic policy. --- Economic nationalism --- Economic planning --- National planning --- State planning --- Economics --- Planning --- National security --- Social policy --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Economic cycles --- Economic fluctuations --- Cycles --- Balance sheets --- Corporate financial statements --- Earnings statements --- Financial reports --- Income statements --- Operating statements --- Profit and loss statements --- Statements, Financial --- Accounting --- Bookkeeping --- Business records --- Corporation reports --- Leverage, Financial --- Finance --- Financial Risk Management --- Macroeconomics --- Public Finance --- Macroeconomics: Consumption --- Saving --- Wealth --- Money Supply --- Credit --- Money Multipliers --- Financial Crises --- Bankruptcy --- Liquidation --- 'Panel Data Models --- Spatio-temporal Models' --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Debt --- Debt Management --- Sovereign Debt --- Public Administration --- Public Sector Accounting and Audits --- Macroeconomics: Production --- Economic & financial crises & disasters --- Public finance & taxation --- Financial reporting, financial statements --- Private debt --- Financial crises --- Public debt --- Financial statements --- Production growth --- National accounts --- Public financial management (PFM) --- Production --- Debts, Public --- Finance, Public --- Economic theory --- United States --- Panel Data Models --- Spatio-temporal Models

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Total factor productivity growth was stagnant or slowing in many advanced countries even prior to the crisis. This paper documents sector-level productivity patterns across advanced economies prior to the crisis and examines the role of product and labor market rigidities as well as innovation and investments in information technology and human capital in driving productivity differences across sectors and countries. Since productivity payoffs of reforms evolve over time, we also focus on large changes in the structural indicators examine their dynamic impact on productivity, employment, and output. Our results suggest that reform priorities depend on country-specific settings, including the scale of specific policy distortions and the distance from the technology frontier. Productivity gains from reforms are large and materialize predominantly in the medium term, with some important variations across industries and countries.

Finance: General --- Macroeconomics --- Public Finance --- Production and Operations Management --- Macroeconomic Analyses of Economic Development --- Technological Change: Government Policy --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics: Production --- Labor Economics: General --- General Financial Markets: General (includes Measurement and Data) --- Taxation, Subsidies, and Revenue: General --- Labour --- income economics --- Finance --- Public finance & taxation --- Total factor productivity --- Productivity --- Labor --- Commodity markets --- Information technology in revenue administration --- Financial markets --- Revenue administration --- Industrial productivity --- Labor economics --- Commodity exchanges --- Revenue --- United States --- Income economics