Liability dollarization and exchange rate balance sheet effect on Turkey

Abstract

Financial crises occurring in emerging markets during the late 1990's caused significant changes in literature. Financial crises used to be explained in terms of macroeconomic variables until the late 1990s. Recent studies, however, consider the role of microeconomic variables in the formation of financial crisis. In the case of real depreciation, currency mismatch that affects the balance sheet of firms negatively may lead a decrease in investments. In this study, the results of balance sheet effect of liability dollarization in manufacturing sector for 1998-2007 were investigated by Dynamic Panel Data (DPD) model.