پویایی شرکت، سرمایه گذاری و پرتفوی بدهی : اثرات ترازنامه بحران مکزیک در سال 1994

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.

In the past decade, several Latin American and East Asian countries have undergone currency crises that have been accompanied by substantial falls in investment and output. For instance, Mexico experienced a sudden real exchange rate depreciation of 55% in December 1994. GDP fell by more than 6% in 1995 and capital investment dropped by more than 29% in the same period. Previous quantitative structural models have explained the fall in output and investment in terms of an exogenous drop in total factor productivity (see for example Bergoeing et al., 2002). However, given the large change in the relative price of domestic and foreign goods that was associated with these real effects, it is reasonable to expect that movements in the real exchange rate could have a role to play in explaining movements in investment and output. The existing literature has identified two main channels through which exchange rate depreciations may affect investment (see for example Krugman, 1999). First, depreciations increase the competitiveness of firms in export markets and lead to higher export revenues. Second, firms that hold foreign currency denominated debt face an increase in the value of their liabilities in domestic goods. The former effect, termed the “competitiveness effect”, increases profits and net worth, while the latter, termed the “balance sheet effect”, reduces the net worth of firms. As the literature on the financial accelerator (see for example Bernanke and Gertler, 1989) shows, in a world of imperfectly competitive capital markets, changes to the net worth affect firms' access to external funds and hence do have real effects. We could expect to find a positive or a negative effect of devaluation on investment and output, depending on the relative strengths of the two effects. In this paper, we visit the same question, namely, how do depreciations affect firm investment. We build a model in which we can observe balance sheet and competitiveness effects. In addition, exchange rate movements also affect the cost of credit to firms in our model through two additional (opposing) channels. The interest rates charged to firms in foreign goods increase in the wake of a devaluation. This effect, however, is mitigated by the fact that after a large depreciation, the expectation of subsequent devaluations is substantially smaller. This reduces the value of future expenditures (including debt repayments) in domestic goods. The net effect of devaluations on the cost of credit then depends on which of these effects dominate. We are therefore able to examine the effects of real exchange rate movements on firms' net worth and cost of credit in a unified framework and quantify their effect on output, investment and debt. The model is a partial equilibrium model of a small open economy with heterogeneous firms. There are two goods: a domestic and a foreign good. The relative price of these two goods is the real exchange rate that we assume follows an exogenously given first order Markov process. Firms produce domestic output using capital through a decreasing returns technology. Domestic output can be transformed into exports through a concave technology. In this way, we introduce in a simple way the insight that firms cannot switch their production from domestic markets to exports costlessly, due to, for example, an inelastic world demand for exports. Firms accumulate capital over time. However, investment can only be financed through internal resources or by borrowing in the international capital market. Domestic borrowing and equity issue are not important sources of funds for firms in underdeveloped countries, because of participation constraints and/or high transaction costs.1 Therefore, we abstract from these sources of financing. Foreign debt is denominated in units of the foreign good. In case of default, the foreign lender seizes the current value of firm' resources. The interest rate is firm specific, and equal to the exogenous risk free rate adjusted for a risk premium. Competition among lenders drives expected profits to zero.2 Firms are heterogenous in their productivity, capital stock and foreign debt. Individual firms' productivity follows a first order Markov process. In the aggregate, however, the only uncertainty is about the real exchange rate. Firms face an exogenous death (turnover) probability each period, which, together with firms defaulting on their loans, generates exit in our model. Entry is exogenous, as new firms replace those who exit. We focus on an invariant distribution of firms across states. To calibrate the model, we use a panel of Mexican firms participating in the stock market between 1989 and 1994. These firms accounted for 80% of private borrowing before the 1994–1995 crisis. In this sense, it is a special sample for which we should expect strong effects of the real exchange rate depreciation. We use individual firms' data on capital, sales and exports to construct the idiosyncratic productivity processes. We then calibrate the key parameters so that the invariant distribution of our model replicates some aggregate moments (such as capital to sales, investment to sales, exports to sales, debt to exports ratios, and exit rate) for these firms averaging the 1989–1994 period. The model delivers some predictions, which are supported by the data. The debt contract implies that larger firms get better and cheaper access to foreign credit, which was the case prior to the 1994–1995 crisis. The model also predicts a positive correlation between foreign debt and exports, and between capital and exports. At least qualitatively, this is also what we observe in our sample of firms. The model also has some limitations. We assume that investment and domestic output are the same commodity, abstracting from imports of capital goods. Therefore, we omit a potentially important channel through which a real depreciation affects investment, this is, through changes in the relative price of investment.3 Unfortunately, our panel data does not include information on imports at a firm level. Due to the same data limitation, we do not include labor and intermediate goods in the production function. As an application, we use our quantitative model to analyze the effects of the 1994–1995 Mexican devaluation. We feed our calibrated model with the actual path for real exchange rates between 1995 and 1999, and analyze the response of firms to this sequence of aggregate shocks. The results of our experiment are consistent with: (i) an increase in the debt burden, (ii) an increase in exports and (iii) a decline in investment, immediately after the devaluation. In fact, we account for 85% of the observed drop in investment in 1995 with our model. However, we are not able to account for the sustained export boom in the second half of the 1990s, which can probably be attributed to structural changes in the economy such as NAFTA, and the fast recovery of investment.4 A growing body of theoretical literature on currency crises stresses shocks to firm balance sheets as propagation mechanisms, such as Caballero and Krishnamurthy (2001), Aghion et al. (2000) and Schneider and Tornell (2001). There is also some empirical literature on the evidence of a balance sheet effect on investment. Bleakley and Cowan (2002) find in a cross section of countries that firms holding dollar denominated debt invest more than firms that do not, in other words, the competitiveness effect outweighs the balance sheet effect. The same panel of Mexican firms participating in the stock market that we use in this paper has been used previously to estimate balance sheet effects on investment. Aguiar (2002) looks at the immediate effect of the crisis on investment and currency composition of debt in 1995 in Mexico. He finds that investment was positively related to net worth, which in turn was adversely affected by the holding of dollar debt in this year. Tornell et al. (2004) find a positive relation between cash flow and investment after the 1994–1995 crisis, suggesting the existence of liquidity constraints. They also report a larger decline in investment for non-tradable firms. Pratap et al. (2003) find that, after 1994, exporters invested more than non-exporters, and that firms that held debt in dollars invested less than firms that did not hold dollar debt from 1994 to 1996. However, to the extent that investment, export and borrowing decisions are all made simultaneously, it is not clear that the effects identified in these papers can be considered causal. The paper is organized as follows: The next section sets out some features of the data that we seek to understand. Section 3 describes the model economy. In Section 4, we characterize some properties of the solution. In particular, we show how the interest rate charged by foreign lenders depends on firm's characteristics. In Section 5, we calibrate the model to match some features of the Mexican economy between 1989 and 1994. Section 6 shows the results of the 1994–1995 devaluation experiment. The last section concludes.

We have built a model in which movements of the real exchange rate have important effects on firms’ dynamics, productivity and investment. The key channels seem to be the competitiveness effect, affecting exports and the balance sheet effect, affecting foreign debt burden. We use the model to analyze the effects of the 1994–1995 Mexican devaluation and obtain consistent results in terms of: (i) an increase in the debt burden, (ii) an increase in exports and (iii) a decline in investment, immediately after the devaluation. The experiment, however, has some shortcomings, especially in its ability to predict the medium term effects of the devaluation. First, we do not account for the sustained export boom in Mexico following the 1995 crisis, which are likely to be a by-product of structural reforms (as NAFTA). This boom had echoes in investment and sales in the economy, which are also underpredicted by our model. Including these reforms in the analysis is an interesting topic for future research.