Corporate sector liability dollarization and exchange rate balance sheet effect in Turkey

Mehtap Kesriyeli · Erdal Özmen · Serkan Yiğit

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Global Financial Crisis and Policies Monetary Policy and Economic Impact Economic Theory and Policy

Abstract

In this study, we investigate the causes and balance sheet effect consequences of Liability Dollarization (LD) of nonfinancial sectors in Turkey. The dynamic panel data Generalized Method of Moments (GMM) results suggest that both sector specific and macroeconomic variables are significant in explaining the corporate sector LD. Industries appear to partially match the currency composition of their debt with their income streams. Devaluations are found to be contractionary, in terms of investments and profits, for sectors with higher LD. Macroeconomic instability affects the performance of the industries negatively. Our results also stress the importance of strong macroeconomic policy stance for an endogenous dedollarization process.

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References

1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1995Another look at the instrumental variable estimation of error-components models 1958The Cost of Capital, Corporation Finance and the Theory of Investment 1998The Financial Accelerator in a Quantitative Business Cycle Framework 1999Chapter 21 The financial accelerator in a quantitative business cycle framework 2002Dynamic panel data models: a guide to micro data methods and practice 2000Fear of Floating 2002Fear of Floating

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2021Corporate dollar debt and depreciations: All’s well that ends well?2019Exports, real exchange rates and dollarization: empirical evidence from Turkish manufacturing firms

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