The Open Economy Balance Sheet Channel and the Exporting Decisions of Firms: Evidence from the Brazilian Crisis of 1999

The University of Nottingham Research Paper No. 2011/27

28 Pages Posted: 29 Nov 2011

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Simone Juhasz Silva

Department of Economics and Finance, Murray State University

Date Written: November 29, 2011

Abstract

Many studies consider the aggregate impact of crises on output and the fiscal cost of reconstruction, but few studies of the impact of a crisis at the level of the firm. In this paper we consider the impact of the Brazilian crisis of 1999 on the extensive and intensive margin of exporters versus non-exporters. Using a unified theoretical framework based on a two-sector extension of the combined fixed and variable investment versions of the Holmström and Tirole (1997) closed-economy model, we explore predictors that firms will engage in global markets and export more intensively. Our results based on a detailed firm-level panel of data for Brazilian 52,667 firms from 1995-2007, show that the decision to export and increase export sales is driven by size, the debt ratio, the current ratio and operating costs as well as the direct impact of the crisis itself. The findings suggest that the mechanism is driven by the response of the credit market to the creditworthiness of the firm as it is by changing terms of trade.

Keywords: credit channel, open economy, exports, currency crisis

JEL Classification: D21, D22, F14, F23

Suggested Citation

Bougheas, Spiros and Mizen, Paul and Silva, Simone, The Open Economy Balance Sheet Channel and the Exporting Decisions of Firms: Evidence from the Brazilian Crisis of 1999 (November 29, 2011). The University of Nottingham Research Paper No. 2011/27. Available at SSRN: https://ssrn.com/abstract=1966067 or http://dx.doi.org/10.2139/ssrn.1966067

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Simone Silva

Department of Economics and Finance, Murray State University ( email )

Murray, KY 42071-0009
United States

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