engleski

A new look into the prevalence of balance sheet or competitiveness effect of exchange rate depreciation in a highly euroized economy

The article empirically tests the impact of exchange rate depreciations on sectoral performance proxied by investment or alternatively sales. It measures the balance sheet and the competitiveness effect in a country that records very high levels of liability euroization. Panel data methodology is applied on a dataset of twenty Croatian non-financial sectors combining macroeconomic and sectoral financial information. Results confirm there are strong negative liability euroization effects on both investment and sales. Negative balance sheet effects and very small positive competitiveness effects are found as well, adding up to a negative overall exchange rate depreciation effect on sectoral performance. Moreover, we find evidence that the corporate sector does not hedge against exchange rate exposure and that the domestic financial system is a constraining factor for corporate investment dynamics. We also find proof of size asymmetries related to bank lending relationships.

balance sheet effect; Croatia; euroization; exchange rate; sectors

nije evidentirano