رشد زیر نوسانات نرخ ارز: آیا مشکل دسترسی به بازارهای سهام خارجی و یا داخلی بر طرف می شود؟

Employing a firm-level dataset, this paper explores the effects of exchange rate volatility on the growth performances of domestic versus foreign, and publicly traded versus non-traded private manufacturing firms in a major developing country, Turkey. The empirical results using dynamic panel data estimation techniques and comprehensive robustness tests suggest that exchange rate volatility has a significant growth reducing effect on manufacturing firms. However, having access to foreign, and to a lesser degree, domestic equity markets is found to reduce these negative effects at significant levels. These findings continue to hold after controlling for firm heterogeneity due to differences in export orientation, external indebtedness, profitability, productivity, size, industrial characteristics, and time-variant institutional changes.

The macro and microeconomic effects of exchange rate volatility have long been a major concern in development economics. The primary purpose of the gold standard of the 19th and early 20th centuries and the ensuing Bretton Woods system, as well as the exchange rate mechanism under the European monetary system of the 1990s was to ensure exchange rate stability. In fact, Article 1 of the Articles of Agreement of the International Monetary Fund (IMF) continues to single out the promotion of “exchange stability” as one of its primary objectives. Nevertheless, increasing financial liberalization and capital market integration after the collapse of the Bretton Woods system in 1973 exposed both developed and developing countries to large swings in exchange rates. In a majority of empirical studies, increasing exchange rate uncertainty is found to have economically and statistically significant profitability, investment, growth, and to some degree, trade reducing effects (Aghion et al., 2009, Aizenman and Marion, 1999, Baum and Caglayan, 2010, Bleaney and Greenaway, 2001, Caglayan, 2013, Pindyck and Solimano, 1993 and Ramey and Ramey, 1995). However, research on firm growth effects of exchange rate uncertainty has been much more limited with an exclusive focus on publicly traded firms located mostly in developed countries despite substantial structural differences between developed and developing countries, and between publicly traded and non-traded firms. The lack of research on developing country experiences is especially surprising given that developing countries face higher levels of exchange rate uncertainty with stronger negative welfare effects than developed countries (Pallage and Robe, 2003). The exclusive focus on publicly traded firms is also striking because of the low market capitalization rates in developing countries that limit sample sizes substantially. Furthermore, there has also been no research exploring differences between domestic and foreign firms in their growth responses to exchange rate uncertainty despite a radical increase in foreign direct investment (FDI) inflows to developing countries, reaching $690 billion (or 53% of global flows) by 2010 from $35 billion in 1990 (or 17% of global flows). Furthermore, FDI inflows accounted for 26% of total gross fixed capital formation (GFCF) in developing countries in 2010, almost seven times more than their 1990 level of 4% (UNCTAD, 2012). The increasing participation of foreign firms in production and capital formation in developing countries is expected to have major growth effects given that they are generally found to be more productive and profitable with better access to global and domestic capital markets. As a result they may help mitigate the contractionary effects of exchange rate shocks and currency crises in developing countries. Yet, there has been little empirical work analyzing the growth effects of exchange rate uncertainty on foreign vis-à-vis domestic firms. Building on the heterogeneous firm literature, the current study contributes to the existing research on growth effects of exchange rate uncertainty under capital market imperfections by addressing four issues that were previously unaccounted for. First, it separates firms based on their time-variant degrees of access to foreign equity. Second, it separates firms based on their access to the domestic stock market. Third, it focuses on a major developing country, Turkey. Fourth, instead of using country or industry level aggregates, it controls for firm heterogeneity based on export orientation, external indebtedness, size, industrial characteristics, and productivity and profitability rates. The Turkish case is interesting because it entails four important features. First, Turkey liberalized its capital account in 1989, much earlier than other developing countries, and adopted a very open foreign investment regime, leading to substantial FDI inflows since then.1 Second, as an emerging economy, Turkey has faced high levels of economic instability for the last two decades including significant exchange rate volatility and two severe currency-cum-banking crises in 1994 and 2001. Third, despite comprehensive liberalization programs and a substantial foreign bank presence, the financial sector in Turkey has remained highly underdeveloped. As a result, domestic private firms, both large and small, face strict credit constraints and are forced to finance capital investments mostly from internal sources or short-term borrowing (denominated heavily in foreign currencies), exposing them to exchange rate uncertainty. Looking at the cost of borrowing, for example, the annual average real interest rate reached 11% during 1993–2005, which is the period under consideration in this paper. Likewise, during the same period real private credit (from the banking sector and other financial institutions) to the private sector (as a share of real GDP) was on average a bare 16%.2 Money markets in private securities were also quite underdeveloped with the share of private securities in secondary market transactions being below 15% during 1996–2005 (CBRT, 2012). The average stock market capitalization rate as a share of GDP was only 35% during 1995–2001 and 42% during 2002–2011 (World Bank, 2012) compared to the OECD averages of 98% and 147% during the same periods. As a result, it is no surprise that the average share of short-term debt in total debt of top 500 manufacturing firms was found to be 71% during 1993–2005 (and was still around 68% in 2010). Furthermore, as late as 2010 more than 60% (44%) of large (small) firms depended on foreign currency credits for more than 70% of their total borrowing needs (ICI, 2011). On average, non-financial firms accounted for more than 62% of total private external debt during 1993–2005. Fourth, Turkey provides us with a unique firm level panel dataset, which includes 585 private manufacturing firms with over 4800 firm year observations, accounting for 28% of total manufacturing value added during 1993–2005. In addition to balance sheet and income statement information, the dataset includes time series information on the capital structure of each firm such as the level of foreign ownership, domestic equity market access, and the leverage ratios. The empirical analysis using dynamic panel estimation techniques and comprehensive robustness tests suggest that exchange rate uncertainty has a significantly negative effect on private firm growth. However, having access to foreign capital is found to overcome this negative effect at economically and statistically significant levels. According to point estimates, a one standard deviation increase in exchange rate volatility reduces firm growth by around 4 percentage points among domestic firms. In contrast, having access to foreign equity either reduces this negative effect by around 40% or, depending on the level of foreign ownership, reverses it fully and leads to an around 3 percentage point increase in growth. Supporting this finding, we also find that firms with access to domestic stock market perform significantly better than non-traded firms under exchange rate shocks. We confirmed these results during currency crises episodes as well. Furthermore, we find that the negative growth effect of exchange rate volatility is significantly lower for firms with higher export orientation and better access to credit markets. The rest of this paper is organized as follows: the second section provides a brief overview of the literature on uncertainty and growth relationship. The third section introduces the empirical analysis including the data, methodology and estimation issues. The fourth and fifth sections present the empirical results and robustness analysis, and the final section concludes the paper.

The findings of this study extend the existing research on the growth effects of exchange rate shocks in developing countries. Our empirical analysis suggests that exchange rate volatility has an economically and statistically significant negative effect on firm growth. However, having access to foreign or, to a lesser degree, domestic equity markets is found to reduce this negative effect at significant levels. We have also found some evidence that the positive effect of foreign ownership is increasing with the rate of foreign equity participation. Comparatively speaking, the results suggest that firms with access to foreign equity outperform domestic firms, with or without access to domestic equity markets. In addition, we find that firms with better access to external credit, and foreign goods markets perform better under exchange rate shocks. These empirical results continue to hold after controlling for measurement bias in the exchange rate volatility measure, institutional changes, time fixed effects, and other sources of firm heterogeneity such as, profitability, productivity, size, and industrial characteristics. Better portfolio and risk management, and easier access to internal and external financing sources appear to contribute significantly to the higher growth performance of foreign firms under exchange rate shocks. Overall, the empirical findings in this research highlight the importance of having access to foreign and domestic capital markets in stabilizing growth and reducing contractionary pressures under exchange rate shocks. The current study also opens some new venues for future research such as the distributional impacts of exchange rate shocks and currency crises on domestic and foreign firms, and on the long run portfolio allocation decisions of foreign firms. Does the superior performance of foreign firms cause a crowding out or crowding in of domestic firms? What is the extent to which foreign firms help mitigate the contractionary effects of exchange rate shocks on the overall economy? In addition, both the growth responses of small and medium sized firms to exchange rate shocks as well as the exact channels through which foreign firms manage to control exchange rate shocks remain to be explored in future research.