What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?
Sebnem Kalemli-Ozcan, Herman Kamil, and Carolina Villegas-Sanchez ,
4
( 98 )
Review of Economics and Statistics
756–769
October
2016
Abstract

We quantify the effects of lending and balance sheet channels on corporate investment during large devaluations. We find that if currency crises are accompanied by banking crises, domestic exporters holding unhedged foreign currency debt decrease investment while foreign exporters with better access to credit increase investment despite their unhedged foreign currency debt. We do not find such a differential effect under pure currency crises.

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