The seminar will be held in the Visitor Center at 10 am.
Discussant: Adam Reiff
Abstract
In this paper I examine the exchange rate exposure of Hungarian enterprises from a financial stability perspective. In connection with the recent growth of FX loans to enterprises, the central bank assesses the vulnerability of the banks’ loan portfolio to changes of the exchange rate. To collect firm-level data, two surveys were carried out on exchange rate exposure and exchange rate risk management practices. A 2005 survey showed that the majority of small and medium sized enterprises are exposed to exchange rate devaluation but exchange rate risk management techniques are almost unknown for them. In the 2007 survey, summarized here, large enterprises were also examined, as well as motives for borrowing in foreign currency and the lack of FX risk management tools. Based on the results, the main motive of raising FX debt is smaller interest rates, while at large enterprises natural hedging appears also. Risks of FX debt are ignored by several enterprises, explained by the phenomena that FX risk management tools a re thought to be expensive, complicated or ineffective. Majority of enterprises think there are no possible tools to manage FX risks or they expect external solutions, like the introduction of euro to decrease their risks. Based on calculations, exchange rate devaluations would have a larger negative effect on Hungarian enterprises than appreciations.
Keywords: exchange rate exposure, FX borrowing, FX risk management, survey, probit
JEL: C25, C42, F31, G21, G32