Why do firms default on their foreign currency loans? The case of Hungary
I isolate the effect of the choice of foreign currency on the loan performance of firms borrowing in different currencies in crisis times. I use a novel micro-level dataset from Hungary to decompose the factors contributing to the worse loan performance of foreign currency borrowers compared to local currency debtors. I find that foreign currency denomination can worsen loan performance considerably, while selection also contributes significantly to the default differences. On the one hand, per se less creditworthy firms borrowed in foreign currency and during the crisis the foreign currency shocks further weakened their loan performances. On the other hand, more creditworthy firms that were also well-prepared for the currency risks also borrowed in foreign currency. My results suggest that not the institution of foreign currency lending per se that should be blamed for the bad loan performance of foreign currency borrowers, instead one should consider the characteristics of the borrowers.
Venue: MTA HTK 1097 Budapest Tóth Kálmán u. 4. fszt. K0.11-12 Bisztray Márta: A külföldi működőtőke beruházások és a nemzetközi kereskedelemben való részvétel közvetett hatásai (habilitációs előadás) 2019. január 21. HÉTFŐ MTA Humán Tudományok Kutatóháza, 1097 ... Details »
Venue: MTA Research House, conference room nr. K11-12, ground floor, 4 Tóth Kálmán street, 1097 Budapest. The Centre for Economic and Regional Studies of Hungarian Academy of Sciences launched a new seminar series in 2013. A quarterly event, it features the ... Details »
Venue: MTA Research House, conference room nr. K11-12, ground floor, 4 Tóth Kálmán street, 1097 Budapest Hansjörg Herr (Berlin School of Economics and Law, FMM Fellow and Berlin Institute for International Political Economy): Underdevelopment and unregulated markets: why free markets do ... Details »
Complexity of finding Pareto-efficient allocations of highest welfare was presented by Péter BIRÓ at the International School Choice and Reform Conference. Share this:FacebookLinkedInTwitterGoogle
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