Firm dynamics, investment, and debt portfolio
Subtitle: balance sheet effects of the mexican crisis of 1994
By: Sangeeta Pratap, Carlos Urrutia.
Contributors: Urrutia, Carlos.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10523; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10523.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Foreign exchange rates -- Mexico -- Econometric models.; Financial crises -- Mexico -- Econometric models.; Investments, Foreign -- Mexico -- Econometric models.; Equilibrium (Economics) -- Mathematical models.
Description: "We build a partial equilibrium model of firm dynamics under exchange rate uncertainty.  Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period.  Given their current level of capital stock, firms make their export decisions and choose how much to invest.  Investment is financed through one period loans from foreign lenders.  The interest rate charged by each lender is set to satisfy an expected zero-profit condition.  The model delivers a distribution of firms over productivity, capital stocks and debt portfolios, as well as an exit rule.  We calibrate the model using data from a panel of Mexican firms, from 1989 to 2000, and analyze the effect of the 1994 crisis on these variables.  As a result of the real exchange rate depreciation, the model predicts: (i) an increase in the debt burden, (ii) an increase in exports, and (iii) a large decline in investment.  These real effects are consistent with the evidence for the Mexican crisis"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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