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Publié par | profil-zyak-2012 |
Nombre de lectures | 11 |
Langue | English |
Extrait
Financialfragilityinemergingmarket
countries:firmbalancesheetsandthe
productivestructure
YannickKalantzis
∗
(ENPC,PSE)
May2005
Abstract
Webuildanoverlappinggenerationmodeltostudyfinancialfragi-
lityinatwo-sectorsmallopeneconomy.Firmsaresubjecttoaborrow-
ingconstraintandthereisacurrencymismatchinthebalancesheets
ofthenon-tradablesector.Asaconsequence,atagivenpointin
time,multipleequilibriamayarise,whichmakesself-fulfillingbalance
ofpaymentscrisespossible.Thisstateoffinancialfragilityrequires
thatfirmsproducingnon-tradablegoodsaresufficientlyleveragedand
thattherelativesizeofthenon-tradablesectorissufficientlylargewith
regardstothetradablesector.
Westudyunderwhatconditionstheendogenousevolutionofthese
twostructuralfactors,firmbalancesheetsandtheproductivestruc-
ture,alonganequilibriumpatheventuallyleadstoafinanciallyfragile
state.
Keywords
:balanceofpaymentscrises,financialfragility,foreigncur-
rencydebt,borrowingconstraint,multipleequilibria.
JELClassificationNumbers
:E44,F32,F34,F43,O41
∗
Paris-JourdanSciencesEconomiques.Unite´mixtederechercheCNRS-EHESS-ENPC-
ENS.48,bdJourdan75014Paris.France.
E-mail:
yannick.kalantzis@ens.fr
.
IwouldliketothankRobertBoyerandPhilippeMartinfortheirusefulcommentsand
advice,aswellasparticipantsataseminarinPSE.Ofcourse,alltheremainingerrorsare
myown.
1
Theopeningofdevelopingeconomiestointernationalfinanceinthelast
threedecadeshasledinanumberofcasestobalanceofpaymentscrises.The
SouthernConecrisesatthebeginningoftheeighties,theMexicancrisisof
1994,theAsiancrisesof1997andtheArgentinecrisisof2001alltookplace
afterthecapitalaccounthadbeenliberalized.
Thesuddennessofthesecrisisepisodes,thefactthatsomeofthemwere
triggeredbycontagionphenomenaandtheabsenceofapparentchangesin
fundamentalsbeforethemhaveledmanyanalyststoconcludethattheywere
ofaself-fulfillingnature.
Modelswithmultipleequilibriaseemtobetheproperanalyticaltoolto
addresstheissue.Inthesemodels,thetriggeringofacrisisisanexogenous
andarbitraryevent,oftenrepresentedbyachangeinthevalueofa
sunspot
variable.However,ifthetriggeringofacrisismaybeindependentoffunda-
mentals,the
possibility
ofacrisisisnot:fundamentalshavenotdisappeared,
theyhavejuststeppedbackwardfromfinancialcrisestofinancialfragility.
Multipleequilibriamodelscanthusbeusedtoidentifythestructuralchar-
acteristicsthatmakecrisespossible.
AfirsthintwasgivenbyKrugman(1999):inastaticmodelofasmall
openeconomy,heshowedthatself-fulfillingcrisesarepossiblewhenthefor-
eigncurrencyexternaldebtislargeenoughrelativetoexports.Butthese
possiblestructuralcharacteristicsareendogenousandevolveovertime,espe-
ciallyafteraneconomyhasopeneditscapitalaccount.Therefore,adynamic
frameworkisneededtogiveafullaccountoffinancialfragilityinadeveloping
economyopenedtointernationalfinance.
Thispaperaimsatprovidingsuchaframework.Wedevelopanover-
lappinggenerationmodelwhereintermediatesectorsproducetwokindsof
inputs:tradableandnon-tradable.Awithin-periodsunspotequilibriumis
possiblewhenthedebtrepaymentsoffirmsproducingnon-tradablegoods
arehighenoughrelativetotheircash-flowand/orifthesectorproducing
non-tradablegoodsislargeenoughrelativetothesectorproducingtradable
goods.Financialfragilitythusdependson
bothfinancialandreal
factors:the
2
firm-levelfinancialstructurewithinthenon-tradablesectorandthecross-
sectorialproductivestructure.Bothofthesecharacteristicsevolvealong
equilibriumpaths.Thedynamicpartofthemodelallowsustodetermine
whethertheirevolutioninevitablyleadstoasituationoffinancialfragility.
Wefindthatthisisthecaseforsufficientlylowlevelsofinternationalinterest
rates,asufficientdegreeoffinancialopennessandsufficientlyhighgrowth
rates.
Theprecisemechanismunderlyingtheexistenceofmultipleequilibriain-
volvesaself-reinforcinglinkbetweentherealexchangerateandthelevelof
investmentexpenditures.First,becauseofmoralhazardandimperfectmoni-
toringofloans,firmsaresubjecttoaborrowingconstraint.Theamountthey
areabletoborrowislimitedbytheircash-flows,whichyieldsafinancialaccel-
eratoreffect.Second,theeconomyissubjectto
originalsin
andfirmscannot
contractdebtindomesticcurrency,whichgeneratesacurrencymismatchin
thebalancesheetsoffirmsproducingnon-tradablegoods.Together,these
twomarketimperfectionscreateabalancesheeteffectinthenon-tradable
sector,wherebymovementsintherealexchangerateaffectfirm’sbalance
sheets,theircapacitytoraiseexternalfundsandtheirlevelofinvestment.
Third,investmentpartlyconsistsofexpendituresinnon-tradablegoodsso
thatanincreaseininvestmentprovokesarealappreciation.Thus,areal
appreciationincreasesthecash-flowofnon-tradablefirmsandloosenstheir
borrowingconstraintsothattheycaninvestmore;thehigherlevelofinvest-
mentreinforcestherealappreciationuntiltheborrowingconstraintdoesnot
bindanymore.Onthecontrary,arealdepreciationhasanegativeimpact
ontheirbalancesheets,whichlimitstheinvestmentexpenditurestheycan
financeandfurtherdepreciatestherealexchangerateuntilthenon-tradable
firmseventuallydefaultontheirloans.Tobepossible,thisreinforcingmech-
anismrequiresasufficientlystrongfinancialacceleratoreffect.
Anicefeatureofourmodelisthatitenablesustostudywhetherthe
steadystateofthedynamicsissubjecttofinancialfragility.Whenthis
isthecase,financialfragilityisacharacteristicofanyequilibriumpath,
3
independentlyoftransitoryshocks.Wearethusabletoassessthelong-run
effectofcapitalaccountliberalizationwhereasmostoftheexistingliterature
onthesubjectanalyzesboom-bustepisodes
1
andhavelittletosayabout
financialfragilityinthelongrun.
2
Thestylizedfactsreproducedbythemodelarequalitativelyconsistent
withtheempiricalevidencethathasbeendocumentedinseveralpapers.Our
modelpredictsthatanincreaseintherelativesizeofthenon-tradablesector
withregardstothetradablesectorisoneofthekeyfactorsinducingfinan-
cialfragility.Tornell&Westermann(2002)indeedobserveanasymmetrical
evolutionofthetwosectorsinaneventstudyoftwincrises:therelative
sizeofthenon-tradablesectorincreasesbeforethecrisesanddecreasesaf-
ter.Accordingtoourmodel,anincreaseinthisrelativesizeshouldgoalong
witharealappreciation.Arealappreciationisindeedobservedinthephase
ofhighgrowthprecedingacrisis(Kaminsky&Reinhart1999,Gourinchas,
Valde´s&Landerretche2001,Tornell&Westermann2002).Themodelalso
emphasizesthecentralroleplayedbyinvestmentinthecrisismechanism.
ThisisconsistentwiththefactthatinvestmentisthecomponentofGDP
displayingthelargestvariabilityinthecrisisepisodes,growingrapidlybe-
foreandfallingabruptlyduringthecrisis(Gourinchasetal.2001,Tornell&
Westermann2002).Atlast,thecrisesareoftensudden,afactaccountedfor
byourmultipleequilibriastory.
Thereareanumberofotherpaperstryingtomodeltheinstabilityof
emergingmarketcountries,beginningwiththeseminalpaperofKrugman
(1999)whichprovidesaself-fulfillingcrisismechanismbasedonabalance
sheeteffect,fromwhichourowncrisismechanismisinspired.Whereasthis
modelisstaticandhasonlyonedomesticgood,wemodelatwo-sectorecon-
omyandprovideacompletedynamicframework.Inthesamevein,Jeanne&
1
AnotableexceptionisRancie`re,Tornell&Westermann(2003).Seeourreviewofthe
literaturebelow.
2
Basedonempiricalevidence,Kaminsky&Schmukler(2003)arguethatthelarge
amplitudeofboom-bustcyclesinthestockmarketfollowingfinancialliberalizationmight
beatransitoryphenomenonanddisappearinthelongrun.
4
Zettelmeyer(2002)proposeasimpleandunifiedframeworkthatencompasses
bothKrugman’screditcrunchmodelandotherbalancesheetapproaches
basedonmaturitymismatchesandbankruns.
OurworkismostlyrelatedtoSchneider&Tornell(2004)whichbuilt
adynamicmodelwithmultipleequilibriaandsectorialeffects.Wetryto
explainthesamesetofstylizedfactsastheseauthors.Themaindifference
betweentheirmodelandoursisthattheirexplanationisbasedonaboom-
bustcyclestory.Thedynamicspossiblyleadingtoacrisisneedanexpected
exogenousshocktooccuratsomepointinthefuturetostart.Iftheeconomy
succeedsinreachingthisfinalpointwithoutfallingintoacrisis,itwillremain
safe.Onthecontrary,inourmodel,financialfragilitycanbeastructural
featureoftheeconomy,eveninthelongrun.Inadditiontothat,weexplicitly
modelthetwosectorsinasymmetricway.Inparticular,bothsectorscan
besubjecttoaborrowingconstraint(whetherthisconstraintbindsornotis
anendogenousoutcomeofthemodel)whereasintheirmodeltheborrowing
constraintonlyexists(andalwaysbinds)inthenon-tradablesector.
Rancie`reetal.(2003)developagrowthmodelwhereself-fulfillingcrises
arepossibleinthelongrun.Thisworkdiffersfromoursinthemodeling
details.Intheirsetting,thetradablesectorhasastandardproductionfunc-
tionwithconstantreturnstoscaleandnoborrowingconstraintwhereas
thenon-tradablesectorhasincreasingreturnsandissubjecttoaborrowing
constraint.
3
Inourwork,bothsectorsaretreatedsymmetricallyandany
differencebetweenthemendogenouslyariseasaresultofthemodel.Also,
thecrisismechanismtheyuseisdifferentfromours.
Aghion,Bacchetta&Banerjee(2004