Currency crises and foreign credit in emerging markets
Subtitle: credit crunch or demand effect?
By: Galina Hale, Carlos Arteta.
Contributors: Arteta, Carlos.; Federal Reserve Bank of San Francisco.
Series: FRBSF working paper -- 2007-02; FRBSF working paper (Online) -- #2007-02.
Publisher: Federal Reserve Bank of San Francisco
Published: 2007
Place of publication: [San Francisco]
Language: eng
Format: Electronic resource
Description: Currency crises of the past decade highlighted the importance of balance-sheet effects of currency crises. In credit-constrained markets such effects may lead to further declines in credit. Controlling for a host of fundamentals, we find a systematic decline in foreign credit to emerging market private firms of about 25% in the first year following currency crises, which we define as large changes in real value of the currency. This decline is especially large in the first five months, lessens in the second year and disappears entirely by the third year. We identify the effects of currency crises on the demand and supply of credit and find that the decline in the supply of credit is persistent and contributes to about 8% decline in credit for the first two years, while the 35% decline in demand lasts only five months.
Notes: Title from PDF file (viewed on Aug. 20, 2007).

"January 2007."

Includes bibliographical references.

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