Download Debt Composition and Balance Sheet Effects of Exchange and

Inter-American Development Bank
Research Department – Latin American Research Network
Debt Composition and Balance Sheet Effects of Exchange and
Interest Rate Volatility: A Firm Level Analysis
Registration Form
1.
Name of institution: Instituto Tecnológico Autónomo de México
2.
Name of the participants:
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Project Directors: Sangeeta Pratap
Researcher 1: Ignacio Lobato
Researcher 2: Alejandro Somuano
Researcher 3: _____________________________________________________
Name, title, phone number and e-mail of the person responsible for signing the letter of
agreement with the Bank:
• Name: Dr. Arturo M. Fernandez Perez
• Title: Rector of ITAM
• Phone Number: 52 55 56284101
• Fax: 52 55 56284102
• E-mail: [email protected]
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The research question and why this topic is relevant for the country in question: Yes
The description of the data to be used for the study: Yes
The description of the theoretical framework and the statistical methodology to be
employed. Yes
The hypotheses: Yes
The expected analytical and policy-oriented implications of the study: Yes
Background of the researchers involved: Yes
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studies: Yes
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E-mail: [email protected]
Debt Composition and Balance Sheet Effects of
Exchange Rate and Interest Rate Volatility in
Mexico: A Firm Level Analysis
A proposal presented to the Inter-American Development Bank
Ignacio Lobato*
Sangeeta Pratap*
CIE-ITAM
CIE-ITAM
Alejandro Somuano**
Ministry of Finance
June 2002
Abstract. Using firm level data from the Mexican stock market, we describe how we
plan to estimate the effects of exhange rate volatility on firm investment. We describe
the data and sketch out a methodology to identify net effects of exchange rate changes
on investment which work through the balance sheet effects of currency mismatches as
well as expansionary effects on firm fundamentals.
––––––––
∗
Camino Sta Teresa 930, Mexico D.F., 10700. [email protected], [email protected].
∗∗
Director of Fiscal Policy, Ministry of Finance, Palacio Nacional Patio Central, Mezzanine 1010
, Col. Centro, MEXICO, D.F., 06066, [email protected]
We are grateful to Lorenza Martínez for providing us with the data. Marco Gonzalez gave us valuable
research assistance. We are also grateful to Julio Burciaga for help with the data.
1
1
Data Availability and Description
The Mexican tequila crisis of 1994 has posed a puzzle for the traditional explanations
of financial crises based on macroeconomic imbalances. In 1994, the Mexican rate of
growth of GDP was 4.4%, while the traditional fiscal deficit and the current account
deficit accounted for 0.1% and 7.0% of GDP, respectively. Nevertheless, the crisis of
1994-95 involved a peso devaluation of 44% in nominal terms, and nominal interest
rates increased from 16% in the last quarter of 1994 to 49% in the first quarter of
1995. This led to a substantial decline of 6.2% in GDP in 1995 and 16.4% fall in
capital investment. Credit to the private sector as a percentage of GDP fell from over
45% of GDP in the last quarter of 1994 to less than 41% in the last quarter of 1995
and further to roughly 20% by 2000.1
A new view has emerged in the literature which emphasizes currency mismatches
of assets and liabilities by agents within the economy as the engine for the propagation
of financial crises. (See for example Mishkin 1999, Krugman 1999, Aghion, Bachetta
and Banerji 2001). In this study, we seek to assess the validity of this claim using firm
level data from Mexico. We propose to study whether firm investment was adversely
affected by dollarized liabilities and the extent to which they were able to hedge their
exchange rate risk. This study will give us some insight into the role of a currency
mismatch in exacerbating the crisis of 1994 in the corporate sector.
The data we use comes from the Mexican stock market (Bolsa Mexicana de Valores
or BMV) We have quarterly data from 1989 to 2000. While the sample is restricted
to mostly publicly traded firms and some non traded ones, this is not a serious
limitation for the study. First, this is the only data set of its kind available in Mexico
and provides detailed information on the maturity structure of debt as well as its
currency composition. Second, while small firms which are not listed on the stock
market can probably be exporters, they are not likely to have access to capital markets
in the United States. Our sample therefore contains the firms where we would be most
1
All figures are from the Secretaría de Hacienda y Crédito Público.
2
likely to observe currency mismatches.
Each firm has an identifier which allow us to link it across time. The panel is not
balanced and we do observe entry and exit. Exit can take place if a firm is de-listed
from the stock exchange, or if it merges with another one. In either case, the BMV
does not remove the firm from the panel. We plan to retain firms which are de-listed
in the panel for the entire period for which data is available. For mergers or other
ownership changes, we have two options. The first is to eliminate that firm from the
sample entirely, and the second is, following Bleakely and Cowan (2002) to aggregate
data for all firms which participate in a merger into one artificial firm throughout the
sample. We plan to use both options and see whether our results are significantly
different in each case.
Tables 1, 2 and 3 present some features of our data as it stands. All data is in
real terms, deflated by the GDP deflator (1994=100) as a first step. We expect to
use appropriate sector specific price indices and capital good price indices in our final
version.
The first table presents quarterly data on debt and its breakdown in terms of
maturity structure, currency composition, and source. The debt-asset ratio increased
sharply after the crisis from about 24% to 31%. Foreign debt which was about 60% of
total debt, increased to more than 70%. It is also interesting to see that the ratio of
short term debt to sales abroad is much higher than 1, although it has been decreasing
in recent years. In the years leading up to the crisis debt held in foreign currency
was almost 6 times higher than sales abroad which made the economy vulnerable to
exchange rate shocks. The last two columns show the breakdown of debt into financial
debt (bank and market) and suppliers credit. The latter went down in importance as
a source of credit after the crisis.
Table 2 shows some information about sales, assets, investment and earnings.
One interesting feature is that exports as a fraction of sales increased dramatically
after 1994 from about 10% to almost 25%. The value of total assets declined in this
3
period while earnings went up slightly. Finally Table 3 shows that interest payments
increased substantially in the immediate aftermath of the crisis, which is consistent
with the increase in the value of debt. Investment fell drastically, both in property,
plant and equipment and in inventories.
To summarize the immediate effects of the crisis on our sample, we also reproduce
a table from Burciaga (2002). He uses the same data base but his sample is much
smaller than ours. He divides the sample into 4 sub samples based on two key
variables, the ratio of net sales abroad to the book value of assets and the ratio of
debt in foreign currency to book value of assets in the last quarter of 1993. The first
group refers to firms with high sales abroad as well as a high levels of foreign debt
relative to total assets.2 , while the second to firms with high foreign sales but low
foreign debt. If the currency mismatch explanation is valid, we would expect that
these two groups of firms would perform better than average. The third and fourth
group of firms refer to those with low sales abroad but high debt and those with low
sales and low debt respectively. The results of this exercise are presented in Table 4.
The first noteworthy feature of the data is that the degree of exposure to exchange
rate risk varies across firms. While 58 firms seem to have had some coincidence
between their foreign debt and sales abroad in 1993, there is a significant number
which does not. Infact, 14 firms had high sales abroad and low debt and another 14
had high debt and low sales. This division of the sample helps identify variations in
performance of firms due to currency mismatches.
The next few rows show us the effect of the crisis between 1994.4 and 1995.5
on some key variables. We see that the value of the firm (defined as total debt
plus the book value of capital) declined the most for the third and fourth groups,
i.e. those with low sales abroad. Earnings before taxes, interest and amortization
(EBITDA) declined significantly for the fourth group, i.e. firms with mainly domestic
operations. The third group, i.e. firms with high debt and low sales abroad showed
2
High in this case refers to above median values and low to values below the median in 1993.4.
4
a modest increase of 8% while the largest increases were reserved for the first two
groups. There was a large decline in investment in physical capital in this period. The
smallest declines were for firms which were best protected against currency exposure,
i.e. group 2, with high sales abroad and low debt and group 4 with low sales and low
debt. The remaining two groups suffered much larger declines. As far as foreign sales
are concerned, the second group did somewhat better than the first. Domestic sales
also increased the most of this group while the largest declines were in Group 3 and
Group 4. In sum, the set of firms which seem to have had the best performance in the
immediate aftermath of the crisis is the one with high sales abroad and low foreign
debt. This is what one would expect, since these firms were in a position to reap the
benefits of the devaluation without having to pay most of its costs. The first groups,
or those who had high sales and high debt positions before the crisis also did not do
too badly since they were able to hedge their exchange rate risk.
The previously discussed tables amply demonstrate our access to the data. In
addition, they also show that there is a case for further investigating the phenomenon
of currency mismatches in the corporate sector given the variations in the performance
of the different types of firms that we saw in Table 4.
2
Methodology
Given the data availability, we think that it would be most appropriate to focus
specifically on the currency mismatch in the corporate sector. While a similar phenomenon may be observed in the household sector, we do not know of any database
which would allow us to investigate these issues. While we will continue looking for
such data, we focus our immediate attention on the corporate sector.
Following the project guidelines, we will seek to answer the following questions
1) What determines the currency composition and term structure of debt?
2) Does the holding of dollar denominated debt affect firm investment adversely?
5
As the previous section demonstrates, running the Bleakely-Cowan type of regressions is a straightforward exercise. Furthermore, apart from the larger number
of observations, our data set has some important advantages over theirs. First, they
do not have any data on exports and have to proxy for it by earnings or total sales.
Hence as they conclude, their result that dollar debt is positively related to investment is probably driven by omitted variables like exports which are related to foreign
currency denominated debt. In contrast we have data on net sales in foreign currency
so we can actually control for that and estimate the direct effect of dollar debt on a
firm performance.3
The paper which is most similar to this proposal is Aguiar (2002) which looks at
the immediate effect of the crisis on investment and currency composition of debt in
1995. He finds that the immediate effect of the devaluation was to reduce investment
for firms whose net worth declined. He also finds that exporting and large firms
borrowed the most in foreign currency. However, the time period on which this
study focuses is limited to the 1994-1995 and is not able to exploit any of the panel
characteristics of the data. The author is unable to account for firm heterogeneity and
longer term effects of the devaluation. Furthermore, it is not clear what determines
the net worth of firms. While it is true that the firms with larger foreign debt have
a lower net worth, the effect is not statistically significant. It is not clear therefore,
whether the net worth of firms declined due to the effects of devaluation on their debt
or because of factors related to their fundamentals.
To answer the first question, the equation we would like to look at is
Dit = Zitf α + Ztm γ + δ i + uit
where Dit is the share of dollar denominated debt to total debt and Z f and Z m
3
One shortcoming of our data is that we do not have information on imports. Obstfeld (2001)
and Reif (2001) have shown that devaluations may have contractionary effects through the costs of
imported inputs. However we have data on net sales, which is total sales net of expenditures which
should help mitigate the problem.
6
refer to firm specific and macro variables respectively. In the firm specific variables
it would be important to include a dummy for foreign ownership or collaboration4 as
well as sector dummies. The other variables would be net worth or collateral related
variables such as total assets as well as sales abroad. We would also include debt in
domestic currency as an independent variable to see whether it is a substitute for or
a complement of foreign currency denominated debt. Since the dependent variable
cannot be negative and some firms may have zero debt abroad, this equation will be
estimated with a Tobit.
For the second question, the basic equation would be
Iit
= Xitf α + Xtm γ + β i + εit
Kit
where
I
K
is the ratio of investment to capital for firm i at time t, Xitf refers to firm
specific independent variables and Xtm denotes macro variables such as exchange
rates and interest rates, total bank credit and other macro indicators. These macro
indicators also include measures of volatility of these variables. β i is a firm specific
effect and εit is the error term. Within the firm specific independent variables, we
would include total sales and exports, total debt and foreign currency debt.
An important issue here is that debt, and especially foreign currency debt is likely
to be endogenous. Firms who have good fundamentals are likely to be able to raise
more debt abroad and are also likely to invest more. We think that an estimation
using fixed effects should mitigate that problem to a large extent, but we would also
find some appropriate instruments.
Another related equation that we would like to estimate refers to how the performance of the firms is affected by the exchange-rate movements and the composition
of the debt. In this case the dependent variables of our equations would be sales,
current and future earnings. It can be anticipated that firms with a high proportion
4
Since we know the names of all firms in our sample, finding ownership details is a relatively
simple matter.
7
of their debt nominated in dollars will suffer a severe reduction in earnings, at least
in the short run. This would shed additional light on the second question, namely,
how was the performance of firms affected by currency mismatches.
A final issue of interest is whether these relationships changed across time. In other
words, was the pre-crisis relationship between investment and dollar denominated
debt the same as the post crisis relationship? The length of our panel will allow us to
estimate these relationships before and after 1994.
3
Previous Studies
There are some establishment level studies using the Annual Industrial Survey conducted by the National Institute of Statistics, Geography and Information (INEGI).
The survey covers roughly 3199 manufacturing establishments and is a balanced panel.
The exiting panels are discarded by the collecting agency. While this data base has
information about production, sales, inventories, investment and capital stock, it does
not have any financial information about debt or earnings. The papers most relevant
to this topic based on this data base are:
Babatz, G. and Conesa, A. (1997), “The Effect of Financial Liberalization on the
Capital Structure and Investment Decisions of Firms: Evidence from Mexican Panel
Data”, mimeo.
Gelos, R. Gaston and Isgut, Alberto (2001), “Fixed Capital Adjustment: Is Latin
America Different? Evidence from the Colombian and Mexican Manufacturing Sector”, Review of Economics and Statistics, Vol 83, No. 4, pp. 717-726.
Gelos, R. Gaston and Werner, Alejandro M. (1999), “Financial Liberalization,
Credit Constraints and Collateral: Investment in the Mexican Manufacturing Sector”,
IMF Working Paper 99/25
Gelos, R. Gaston (1998), “Fixed Investment in the Mexican Manufacturing Sector:
Adjustment Costs, Credit Constraints and the Effects of Financial Liberalization”,
8
PhD. Dissertation, Yale University.
Papers based on the data base that we plan to use are:
Martínez, L. and Werner A. (2002), “Exchange rate regimes and the composition
of the corporate debt: the Mexican experience”, Banco de Mexico, working paper.
Schneider, Frank (2000), “Determinantes de Aplancamiento: El Efecto de Tratado
de Libre Comercio sobre la Estructura Financiera de las Empresas de la BMV”,
Gaceta de Economia, 11, 99-146.
Aguiar, M. (2002), “Devaluation, Foreign Currency Exposure and Investment:
The Case of Mexico”, mimeo, U. of Chicago.
Burciaga, Julio (2002), Exposición al Tipo de Cambio en México (1990-2001),
Undergraduate thesis, ITAM.
References
[1] Aghion, P., Bachetta, P., and Banerji, A. (2001), “Currency Crises and Monetary
Policy in an Economy with Credit Constraints”, European Economic Review, 45
(7), 1121-50.
[2] Aguiar, M. (2002), “Devaluation, Foreign Currency Exposure and Investment:
The Case of Mexico”, mimeo, U. of Chicago.
[3] Bleakley, H. and Cowan, K., “Corporate Dollar Debt and Devaluations: Much
Ado About Nothing”, mimeo, MIT.
[4] Burciaga, Julio (2002), Exposición al Tipo de Cambio en México (1990-2001),
Undergraduate thesis, ITAM.
[5] Krugman, P. (1999), “Balance Sheets, the Transfer Problem, and Financial
Crises”, International Tax and Public Finance, 6(4), 459-72.
9
[6] Mishkin. F. (1999), “Global Financial Instability: Framework, Events, Issues”,
Journal of Economic Perspectives, 13, 3-20.
[7] Obstfeld, M. (2001), “Global Implications of Self Oriented National Monetary
Rules”, mimeo, UC Berkeley.
[8] Reif, T. (2001), “The Real Side of Currency Crises”, mimeo. Columbia University.
10
EXCHANGE RATE, 1994-2002
(Pesos per dollar)
11
9
7
5
3
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I
94
95
96
97
98
99
00
01
02
Source: Banco de México.
Figure 1:
INTEREST RATES, 1994-2002
(%)
60
50
40
30
20
10
0
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I
94
95
96
97
98
99
00
01
02
Domestic (Cetes 90 days)
Source: Banco de México and Federal Reserve.
Figure 2:
Treasury Bills (90 days)
Table 1: Composition of Debt
1989.1
1989.2
1989.3
1989.4
1990.1
1990.2
1990.3
1990.4
1991.1
1991.2
1991.3
1991.4
1992.1
1992.2
1992.3
1992.4
1993.1
1993.2
1993.3
1993.4
1994.1
1994.2
1994.3
1994.4
1995.1
1995.2
1995.3
1995.4
1996.1
1996.2
1996.3
1996.4
1997.1
1997.2
1997.3
1997.4
1998.1
1998.2
1998.3
1998.4
1999.1
1999.2
1999.3
1999.4
2000.1
2000.2
2000.3
2000.4
No. of
Firms D=Assts Df =D Dfs=Ds Df l =Dl Dfs=Sf Ds=D Dl =D Dfn =D Dtr =D
90
0.178 0.443
0.298
0.612
2.198 0.625 0.375
0.677 0.216
99
0.170 0.419
0.312
0.583
2.401 0.635 0.365
0.666 0.229
99
0.141 0.456
0.332
0.639
1.464 0.696 0.304
0.592 0.294
103
0.161 0.494
0.382
0.660
2.265 0.712 0.288
0.611 0.269
180
0.196 0.486
0.392
0.648
2.966 0.675 0.325
0.592 0.311
188
0.179 0.481
0.369
0.673
3.182 0.646 0.354
0.547 0.346
196
0.181 0.480
0.407
0.619
2.981 0.731 0.269
0.566 0.336
210
0.195 0.526
0.438
0.684
2.771 0.719 0.281
0.566 0.352
229
0.194 0.464
0.396
0.597
4.137 0.706 0.294
0.551 0.347
228
0.212 0.500
0.419
0.639
4.892 0.652 0.348
0.594 0.315
228
0.211 0.525
0.450
0.651
4.833 0.695 0.305
0.609 0.308
238
0.218 0.544
0.488
0.640
5.471 0.667 0.333
0.517 0.392
232
0.201 0.500
0.464
0.563
6.449 0.682 0.318
0.539 0.369
231
0.205 0.505
0.432
0.623
6.122 0.620 0.380
0.540 0.378
230
0.201 0.514
0.446
0.616
6.129 0.656 0.344
0.467 0.461
239
0.186 0.528
0.436
0.653
6.545 0.683 0.317
0.383 0.505
229
0.198 0.531
0.429
0.667
6.749 0.688 0.312
0.463 0.440
236
0.218 0.551
0.449
0.680
7.108 0.592 0.408
0.515 0.412
230
0.195 0.573
0.461
0.703
6.852 0.635 0.365
0.472 0.451
234
0.229 0.588
0.444
0.743
3.564 0.557 0.443
0.525 0.397
230
0.229 0.608
0.460
0.752
5.528 0.542 0.458
0.554 0.375
224
0.224 0.604
0.451
0.750
5.135 0.542 0.458
0.539 0.398
221
0.238 0.591
0.422
0.752
4.220 0.489 0.511
0.589 0.357
212
0.271 0.638
0.483
0.803
4.446 0.509 0.491
0.589 0.363
199
0.313 0.712
0.577
0.850
4.451 0.516 0.484
0.663 0.303
210
0.277 0.685
0.544
0.838
3.168 0.533 0.467
0.690 0.262
204
0.283 0.693
0.563
0.824
3.444 0.502 0.498
0.700 0.255
195
0.316 0.705
0.589
0.834
3.714 0.528 0.472
0.667 0.283
201
0.317 0.693
0.567
0.831
3.785 0.524 0.476
0.712 0.238
194
0.393 0.685
0.568
0.811
3.480 0.501 0.499
0.770 0.191
189
0.378 0.672
0.564
0.790
3.623 0.511 0.489
0.770 0.196
190
0.388 0.672
0.532
0.818
3.129 0.497 0.503
0.736 0.214
205
0.319 0.675
0.560
0.812
4.102 0.546 0.454
0.717 0.225
180
0.390 0.679
0.536
0.835
2.688 0.511 0.489
0.776 0.182
185
0.374 0.675
0.530
0.835
3.567 0.512 0.488
0.764 0.195
183
0.388 0.697
0.486
0.886
2.445 0.459 0.541
0.739 0.211
166
0.361 0.703
0.501
0.890
2.992 0.470 0.530
0.743 0.205
144
0.394 0.700
0.514
0.869
2.977 0.466 0.534
0.757 0.200
144
0.393 0.723
0.550
0.881
3.102 0.467 0.533
0.772 0.195
169
0.374 0.670
0.489
0.855
2.700 0.510 0.490
0.744 0.210
157
0.358 0.662
0.471
0.859
3.178 0.508 0.492
0.765 0.185
146
0.354 0.611
0.384
0.873
2.672 0.539 0.461
0.757 0.195
147
0.321 0.597
0.380
0.857
2.901 0.566 0.434
0.769 0.187
149
0.321 0.604
0.368
0.875
2.887 0.542 0.458
0.723 0.222
135
0.361 0.595
0.354
0.882
2.510 0.541 0.459
0.625 0.179
135
0.362 0.598
0.349
0.900
2.170 0.516 0.484
0.623 0.181
135
0.357 0.575
0.344
0.901
2.463 0.549 0.451
0.620 0.184
124
0.377 0.568
0.364
0.892
1.850 0.573 0.427
0.594 0.203
Note: Averages across companies. D= Total Debt, Df =Debt in foreign currency, Dfs=Short term debt in foreign currency,
Ds=Total short term debt, Df l =Long term debt in foreign currency, Dl =Total long term debt, Sf =Sales in foreign currency,
Dfn =Financial Debt including bank debt and market debt, Dtr =Trade Debt.
1
Table 2: Earnings and Sales
1989.1
1989.2
1989.3
1989.4
1990.1
1990.2
1990.3
1990.4
1991.1
1991.2
1991.3
1991.4
1992.1
1992.2
1992.3
1992.4
1993.1
1993.2
1993.3
1993.4
1994.1
1994.2
1994.3
1994.4
1995.1
1995.2
1995.3
1995.4
1996.1
1996.2
1996.3
1996.4
1997.1
1997.2
1997.3
1997.4
1998.1
1998.2
1998.3
1998.4
1999.1
1999.2
1999.3
1999.4
2000.1
2000.2
2000.3
2000.4
Sf =Sales
0.134
0.148
0.209
0.187
0.149
0.138
0.137
0.179
0.125
0.114
0.111
0.104
0.102
0.091
0.093
0.075
0.086
0.080
0.081
0.126
0.102
0.104
0.113
0.150
0.213
0.262
0.250
0.243
0.237
0.240
0.227
0.208
0.222
0.236
0.203
0.207
0.197
0.203
0.216
0.196
0.206
0.199
0.153
0.158
0.195
0.216
0.203
0.274
Net
Assets
16221.7311
14687.1244
16412.0205
16947.2272
13771.2190
12537.8215
12670.1626
11889.2268
11693.1286
10734.2335
10936.0127
10451.7927
10814.6094
10065.3693
10329.3845
10310.3267
10971.6953
10686.0598
11548.4462
11987.1602
12472.7809
12668.0699
13341.4283
15507.1091
17385.3568
15206.2061
15322.9025
15024.4394
14964.2107
14764.1596
14984.9668
14921.1408
10354.0029
15137.6939
15107.3313
15998.8482
18419.5028
17373.8274
18718.1845
17209.8444
16611.8264
17337.6823
19363.7589
19623.7647
19082.2847
19263.5011
18891.0064
19038.1596
Sales EBITDA
3847.275 805.400
3633.993 982.320
4949.620 1308.327
4298.565 1251.370
3643.378 617.440
3234.147 752.543
4037.760 970.399
3775.572 997.634
3282.889 531.715
2869.599 703.602
3383.671 875.972
3410.857 960.579
2973.225 527.045
2919.846 667.555
3159.860 843.374
3511.722 1002.459
3068.046 575.332
3226.372 732.828
3358.227 928.418
3993.579 1158.267
3409.379 650.888
3575.961 894.426
3784.755 1126.036
4531.683 1393.289
4586.787 1046.325
3980.011 1111.431
3741.348 1358.057
4516.172 1589.739
4067.669 907.909
4365.039 1201.832
4257.519 1427.508
5018.203 1841.801
2863.564 622.630
5608.493 1425.374
4590.968 1561.092
5746.107 1984.884
5273.216 1070.577
5777.050 1550.493
6138.528 1997.144
6497.801 2239.166
4885.370 1039.489
5407.015 1544.149
6863.913 2785.453
6602.695 2907.622
6456.576 1589.835
7030.494 2226.976
7053.084 2722.874
9168.143 3493.472
Note: Averages across companies. All data in thousands of 1994 pesos. I=K =Investment to Capital Ratio.
2
Table 3: Investment and Interest Payments
Inventory
Fixed
Interest Investment Investment
1989.1 360.045
1989.2 303.677
-0.569
43.264
1989.3 474.354
3.225
23.587
1989.4 284.420
0.693
21.521
1990.1 291.231
10.414
62.179
1990.2 283.593
-1.542
-31.512
1990.3 320.882
0.452
0.185
1990.4 204.575
-2.145
-2.945
1991.1 218.760
1.354
-2.353
1991.2 191.546
-3.638
-28.838
1991.3 223.056
-0.402
-6.206
1991.4 203.293
-0.367
-0.130
1992.1 179.489
-1.615
-12.698
1992.2 144.252
-1.642
-20.463
1992.3 191.445
0.779
1.737
1992.4 209.530
0.307
4.400
1993.1 209.700
-0.930
-5.149
1993.2 210.415
-0.199
-2.419
1993.3 215.599
-0.446
0.688
1993.4 209.495
0.070
8.271
1994.1 175.147
-1.020
1.103
1994.2 199.265
-0.117
-2.568
1994.3 236.860
0.400
-2.273
1994.4 290.321
3.465
36.656
1995.1 557.285
-1.822
5.657
1995.2 595.675
-5.072
-52.301
1995.3 446.781
-2.410
-22.029
1995.4 557.828
-0.736
-7.665
1996.1 430.076
-0.853
-17.628
1996.2 402.816
-1.173
-10.358
1996.3 371.691
-1.223
-10.605
1996.4 446.443
-0.126
-7.758
1997.1 225.357
-3.143
-31.262
1997.2 399.438
2.287
20.907
1997.3 311.649
-0.650
-2.893
1997.4 367.748
1.025
1.837
1998.1 315.613
-0.674
-7.654
1998.2 324.710
-1.988
-17.447
1998.3 361.649
0.090
2.876
1998.4 486.763
0.475
2.619
1999.1 335.483
-1.989
-16.537
1999.2 318.796
-0.833
-5.232
1999.3 378.052
-0.118
12.894
1999.4 362.209
0.541
1.581
2000.1 313.786
-0.582
-6.740
2000.2 359.412
-0.134
0.903
2000.3 352.460
-0.101
-1.956
2000.4 547.855
0.639
-2.140
Note: Averages across companies. All data in thousands of 1994 pesos.
3
Table 4: Immediate Eects of the 1994 Peso Devaluation
Group 1 Group 2 Group 3 Group 4 All
No. of Firms
29
14
14
29 86
Ratio of Exports
0.24
0.10
0.01
0.01 0.10
to Total Sales in 1994.4
Ratio of Foreign
0.69
0.21
0.56
0.11 0.40
to Total Debt in 1994.4
% Change between 1994.4 and 1995.4 in
Exports
28
56
0
0 61
Domestic Sales
-10
19
-37
-18 -14
Investment
-83
-56
-77
-69 -74
EBITDA
37
48
8
-47 10
Firm Value
-17
-33
-59
-50 -35
Note: Group 1 rms have both high sales abroad and high dollar denominated debt. Group 2 rms have
high sales abroad but low dollar denominated debt while Group 3 rms have low sales abroad and high
dollar denominated debt. Finally Group 4 rms have low sales abroad and low dollar denominated debt.
4
11
4
Dissemination Activities
Our goal is to produce, present, and publish high-quality research in the best peerreviewed journals. Hence, our strategy is to first present our results at two major
conferences. After incorporating comments and suggestions gained at these conferences and from other peers, we will then submit the resulting papers to peer-reviewed
journals. The chosen conferences are the annual meetings of the North American and
Latin American Econometric Society (NAMES and LAMES), (LAMES), the Latin
American and Caribbean Economics Association (LACEA) Meetings, and the NBER
summer workshops.
The next step is to revise and submit the papers to academic journals. Our goal
is to submit the papers to the highest possible quality of peer-reviewed journal. In
addition to top general interest journals such as the American Economic Review,
the Review of Economics and Statistics, the International Economic Review or the
Journal of Business and Economic Statistics, we will also consider top field journals
such as the Journal of Monetary Economics, Journal of International Economics and
Journal of Development Economics
12
13
IGNACIO N. LOBATO
ADDRESS:
Centro de Investigación Económica
ITAM
Av. Camino a Sta. Teresa 930
Ciudad de México 10700
México
EDUCATION:
• Licenciatura en Ciencias Económicas (BSc. In Economics). Universidad Autónoma de Madrid. (July
1988).
• M.Sc. in Economics. Centro de Estudios Monetarios y Financieros (CEMFI). (July 1990).
• M.Sc. in Econometrics and Mathematical Economics. London School of Economics. (July 1991).
• Ph.D. in Economics. London School of Economics. (June 1995). Supervisor: Professor P.M.
Robinson.
SCHOLARSHIPS:
• Instituto de Economía y Geografía Aplicadas (IEGA). Consejo Superior de Investigaciones Científicas
(CSIC)- Applied Economic and Geography Institute of the Spanish Scientific Research National
Council. Sept 1986-July 1988.
• Centro de Estudios Monetarios y Financieros (CEMFI)- Center for Monetary and Financial Studies of
the Bank of Spain. Sept.1988-July 1990.
• Bank of Spain. October 1990 - July 1994.
• College of Business Summer Grant. University of Iowa. July 1995.
• Old Gold Summer Fellowship. University of Iowa. July 1997.
AWARDS:
• Premio Extraordinario de Licenciatura (Special B.Sc. Award).
• Tercer Premio Nacional de Licenciatura (B.Sc. National Prize).
• Distinction in the MSc. in Econometrics and Mathematical Economics. London School of Economics.
• Sistema Nacional de Investigadores (SNI) Nivel II. -National Researchers System-Conacyt. Level II.
July 2001.
WORKING EXPERIENCE:
• Teaching Assistant. Economics and Statistics Departments. London School of Economics. October
1991 - July 1994.
• Research Assistant to Professor P.M. Robinson. Economics Department. LSE. October 1991 - June
1994.
• Assistant Professor. Economics Department. University of Iowa. August 1994-.July 1998.
• Profesor Investigador. Centro de Investigación Económica, ITAM. August 1998-.
FOCUS: Econometrics
EXPERTISE: Econometric Theory, Time Series Analysis, Applied Economics.
PROFESSIONAL ACTIVITIES:
• Member: Econometric Society, Institute of Mathematical Statistics.
• Referee: Journal of Econometrics, Econometrica, Journal of Business and Economic Statistics,
Journal of Applied Econometrics, Scandinavian Journal of Statistics, Journal of the American
Statistical Association, Journal of Statistical Planning and Inference, Review of Economic Studies,
Econometric Theory, Journal of Empirical Finance, Journal of Futures Markets.
• Member of the Program Committee of the XVII Latin American Meeting of the Econometric Society.
• Member of the Editorial Board Gaceta de Economía del ITAM.
PAPERS:
• Averaged Periodogram Estimation of Long Memory (with Peter Robinson), J. of Econometrics, 1996,
73, 303-324.
• Consistency of the Averaged Cross-Periodogram in Long Memory Series, J. of Time Series Analysis,
1997, 18, 137-155.
• Semiparametric Estimation of Seasonal Long Memory Models: Theory and an Application to the
Modeling of Exchange Rates, Investigaciones Económicas, vol XXI(2), 1997, pp.273-295.
•
Real and Spurious Long Memory Properties of Stock Market Data (with N.E. Savin), J. of Business
and Economic Statistics, vol. 16, 1998, pp. 261-283 (including comments and reply).
• A Nonparametric Test for I(0) (with Peter Robinson), Review of Economic Studies, 1998, vol. 65,
pp.475-495.
• A Semiparametric Two-Step Estimator for a Multivariate Long Memory Model, J. of Econometrics,
1999, Vol. 90, pp. 129-153.
• Long Memory in Stock Market Trading Volume (with Carlos Velasco), J. of Business and Economic
Statistics, 2000, vol. 18, pp.410-427.
• Testing for Autocorrelation Using a Modified Box-Pierce Q test (with N.E. Savin and John
Nankervis), International Economic Review, 2001, vol. 42, pp.187-205.
• Testing that a dependent process is uncorrelated, Journal of the American Statistical Association,
2001, vol.96, pp.1066-1076.
• Testing for Zero Autocorrelation in the Presence of Statistical Dependence (with N.E. Savin and John
Nankervis), Econometric Theory, 2002, vol. 18, pp. 730-743.
• Testing for nonlinear autoregression, Journal of Business and Economic Statistics, forthcoming.
Working Papers:
• Consistent test for the martingale difference hypothesis (with Manuel Domínguez), submitted to
Econometric Reviews, second round.
• A simple test for normality in the presence of serial correlation (with Carlos Velasco), submitted to
Econometrica.
• Bootstrapping the Box-Pierce Q test: a robust test of uncorrelatedness (with Joel Horowitz, John
Nankervis and N.E. Savin), submitted to Journal of Econometrics.
PRESENTATIONS AT CONGRESSES:
Invited:
• Real and Spurious Long Memory Properties of Stock Market Data, Joint Statistical Meeting, Anaheim,
August 1997.
• Long Memory in Stock Market Trading Volume. Latin American Meeting of the Econometric Society.
Cancún, August 1999.
Contributed:
• A Lagrange Multiplier test for I(0). Midwest Econometric Group Meeting, Iowa City, October 1994.
• Multivariate Quasi-Maximum Likelihood Analysis of Long Memory Series. Séminaire Européen de
Statistique: Likelihood, Time Series, with Econometric and other Applications, Nuffield College,
Oxford, December 1994.
• Multivariate Quasi-Maximum Likelihood Analysis of Long Memory Series. Seventh World Congress
of the Econometric Society, Tokyo, August 1995.
• Real and Spurious Long Memory Properties of Stock Market Data. Midwest Econometric Group
Meeting, Madison, November 1996.
• A Nonparametric Test for I(0). North American Meeting of the Econometric Society, New Orleans,
January 1997.
• A Semiparametric Two-Step Estimator for a Multivariate Long Memory Model. European Meeting of
the Econometric Society, Berlin, September 1998.
• Long Memory in Stock Market Trading Volume. European Meeting of the Econometric Society.
Santiago de Compostela, August 1999.
• Testing that a dependent process is uncorrelated. Fifth World Congress of the Bernouilli Society and
the Institute of Mathematical Statistics, Guanajuato, May 2000.
• Consistent test for the martingale difference hypothesis. Eighth World Congress of the Econometric
Society, Seattle, August 2000.
• Testing for nonlinear autoregression, Joint Statistical Meeting, Atlanta, August 2001.
• Testing for nonlinear autoregression, European Meeting of the Econometric Society, Laussane, August
2001.
• Testing for nonlinear autoregression, Latin American Meeting of the Bernouilli Society, La Habana,
November 2001.
Sangeeta Pratap
Curriculum Vitae
Personal Information
Address:
Centro de Investigación Económica
Instituto Tecnológico Autónomo de México
Av. Camino de Sta. Teresa #930
Mexico D.F. 10700
Mexico
Phone:
Fax:
E-mail:
+ (52 5) 628 40 00 extn 2966
+ (52 5) 628 40 58
[email protected]
Education
PhD., Economics, New York University, 1998
Dissertation: Essays on Firm Investment under Imperfect Capital Markets
Committee: Professors Mark Gertler, Christopher J. Flinn, Jason Cummins
M.Phil, Economic Theory, University of Cambridge, U.K. 1990
M.A., Economics, Jawaharlal Nehru University, New Delhi, 1988
B.A., Economics (with Honors), Lady Shri Ram College, Delhi University, 1986
Fields of Interest
Macroeconomics, Econometrics, Applied Microeconomics
Work Experience
ITAM, Assistant Professor, August 1998 to present
Research Fellow, Institute for Studies in Industrial Development, New Delhi, 1990-1993
Academic Papers
“Firm Investment Under Imperfect Capital Markets: A Structural Estimation” (with
Silvio Rendón), March 2002 (revised and resubmitted to the Review of Economic
Dynamics)
“Do Adjustment Costs Explain Investment Cash Flow Insensitivity?” Journal of
Economic Dynamics and Control, forthcoming
“Financial Market Discipline in early 20th century Mexico” November 2000 (with
Elisabeth Huybens and Astrid Luce)
“Are Labor Markets Segmented in Argentina: A Semi Parametric Approach” April 2002
(with Erwan Quintin)
Research in Progress
“Some Identification Issues in the Estimation of Dynamic Models”, (with Silvio
Rendón).
“Nutrition Curves and the Intra household Allocation of Calories in Mexico” (with
Tridib Sharma)
Seminar Presentations
ITAM_University of Texas Workshop, November 2001
Federal Reserve Bank of Dallas April 2001
Stanford University, November 2000
Institute of Fiscal Studies, London, May 1999
York University, York, Canada, March 1998
ITAM, February 1998
Wellesley College, February 1998
SUNY Binghamton, January 1998
European University Institute, September 1996
Conference Presentations
Society for Economic Dynamics Meetings, New York, June 2002
1st ITAM Conference on Poverty, May 2002
LACEA Meetings, Montevideo, October 2001
Society for Economic Dynamics Meetings, Stockholm, June 2001
Meeting of the Society for Computational Methods in Economics, Barcelona, 2000
Latin American Meetings of the Econometric Society, Cancun, 1999
Society for Economic Dynamics Meetings, Sardinia, 1999
South Asian Meetings of the Econometric Society, Delhi, December 1996
Honors:
MacCracken Fellowship, New York University, 1993 to 1998
GSAS Dissertation Fellowship, New York University, 1996
C.V. Starr Center Advanced Scholars Fellowship, New York University, 1996
Alejandro Somuano
Rio Guadiana 10 - 301
Mexico, D.F. 06500
Fax: (55) 9158-14-65
(55) 5566-08-19
e-mail: [email protected]
________________________________________________________________________________________
EDUCATION
8/95 - 5/01
8/88 - 12/92
The University of Texas at Austin
Austin, TX, USA
Ph.D. Program in Economics
Main fields: Monetary Economics, International Trade, Econometrics,
Latin American Economics
Instituto Tecnológico Autónomo de México (ITAM)
Bachelor of Science in Economics
Mexico City, MEXICO
EXPERIENCE Ministry of Finance
5/01 - present
6/98 - 8/98
1/95 - 7/95
10/93 - 12/94
1/90 - 9/93
SKILLS
Mexico City, MEXICO
Director of Fiscal Policy
• Estimation of econometric models of public revenues and public expenditure.
• Elaboration of periodical reports on public finances and public debt.
• Analysis of fiscal policy sustainability.
Mckinsey and Company, Inc.
Mexico City, MEXICO
Summer Internship
• Constructed a financial model.
• Helped to define a long-term commercial strategy.
• Developed the path to implement a new organizational structure.
• Prepared and led a number of presentations.
Ministry of Commerce and Industrial Promotion
Mexico City, MEXICO
Assistant Director of Antidumping and Safeguards
• Helped to analyze dumping case against Mexican cement industry.
• Analyzed cost structure of fishmeal industry in several countries.
• Helped to determine degree of import dumping in Mexican fishmeal market.
• Helped to determine optimal trade policy for domestic fishmeal industry.
Federal Antitrust Commission
Mexico City, MEXICO
Assistant Director of Mergers and Acquisitions
• Analyzed mergers and acquisitions from a competitive perspective.
• Analyzed various highly concentrated industries in Mexico.
• Helped develop merger guidelines for Mexico.
• Conducted extensive research project on the Mexican cement industry.
Inteligencia Comercial, S.A. de C.V.
Mexico City, MEXICO
Co-owner - Consultant
• Analyzed franchising potential of interested businesses.
• Developed strategies for new franchises and designed franchising contracts.
• Promoted expansion of domestic and foreign franchising businesses.
• Served as investment broker for domestic and foreign franchises.
Languages: Spanish (native), English (fluent), Portuguese (fluent).
Computer Skills: Unix, Windows, SAS, TSP, EViews, MATLAB, FORTRAN.
HONORS &
AWARDS
• “Scholarship for Graduate Studies,” CONACYT, Mexico (8/95 - 8/00).
• “Pre-dissertation Grant” for field research in Brazil, Ford Foundation (Summer 97).
• “Solidaridad” Presidential Scholarship, Center of Mexican Studies, UT (8/98 - 6/99).
• “E.D. Farmer” Fellowship, University of Texas (1/00 – 12/00).
• “Hale” Fellowship, University of Texas (6/00 – 8/00).
PUBLICATIONS
• “Banking Crises in the 1990s: the cases of Mexico and Japan,” with Pere Gomis,
Inverworld, Quarterly Report, June 1999.
• “Optimal Number of Outlets in a Pure Franchise System,” Gaceta de Economía 9,
ITAM, Mexico, December 1999.
• “Privatization, Deregulation and Competition in the Mexican Airlines Industry,” with
Fabián Sánchez, Latin American Competition Bulletin 9, European Community
Publications, January 2000.
• “Currency Substitution in Latin America: Lessons from the 1990s,” with Pere Gomis
and Carlos Serrano, Research Policy Working Paper 2340, World Bank, May 2000.
• “Innovations in High-Tech Firms: Evidence from Texas,” with Elsie Echeverri,
Southwestern Journal of Economics, June 2001.
• “Productivity and Exporting Behavior: Micro-evidence from Mexican Manufacturing,”
with Alexandra Thome, in revision for The Journal of International Trade.
• “Fiscal Rules in Mexico,” with Andrés Conesa, Volume on Fiscal Rules in Emerging
Economies, International Monetary Fund, forthcoming 2002.
WORK IN PROGRESS
• “Full Dollarization and Credit Markets: Is it Worthwhile to Abandon the Local
Currency?,” with Pere Gomis, submitted to The International Journal of Money and
Finance.
• “Reserve Requirements, Inflation and Welfare,” submitted to The International Review
of Economics and Finance.
• “Currency Substitution in Mexico: Some Empirical Evidence,” mimeo, University of
Texas, June 2000.
• “Incentives and Efficiency in Monetary Union Design,” with Christopher Sleet, mimeo,
University of Texas, July 2000.