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Author ORCID Identifier



Open Access Dissertation

Document Type


Degree Name

Doctor of Philosophy (PhD)

Degree Program


Year Degree Awarded


Month Degree Awarded


First Advisor

Gerald A. Epstein

Second Advisor

Arslan Razmi

Third Advisor

Adam D. Honig

Subject Categories

Corporate Finance | Economics | International Economics | Macroeconomics


Until the East Asian Crisis of 1990s, literature exclusively focused on the assumed expansionary competitiveness channel of deprecation in the domestic currency. The East Asian and Latin American Crisis of 1990s proved that depreciation in the domestic currency caused fragilities through the deterioration in firms’ balance sheet net- worth. Many have argued that excessive reliance on short-term debt and un-hedged foreign currency borrowings of firms were responsible of fragilities, and resulting poor performances of firms in these countries. The latter body of the literature introduced the contractionary balance sheet effects of foreign currency indebtedness through depreciation, and argued that if a portion of debt is denominated in a foreign currency, a depreciation may lead to a substantial real melt-down in the net-worth of firms. As a result, the expansionary competitiveness effect of depreciation may be limited or even be reserved due to contractionary balance sheet effect of depreciation. The increase in the trend and the size of the foreign currency indebtedness of non-financial corporations in the emerging market economies in the aftermath of the Global Financial Crisis of 2007 galvanized similar discussions and raised the concern over the potential fragilities due to non-financial corporations’ un-hedged currency risks. Motivated from these recent discussions, this dissertation analyzes the size and the effect of foreign currency exposure of Turkish non-financial corporations (NFCs) thorough exchange rate fluctuations. Doing so, I constructed a novel hand-collected dataset which has detail information on the currency composition, break-down and maturity structure of firms’ foreign currency debts and assets. Chapter 1 of the dissertation introduces the theoretical background of the relationship between currency mismatch and depreciation. Chapter 2 introduces the sources, and then discusses strengths, weaknesses and potential uses and contributions of the dataset compiled for this dissertation. Chapter 3 descriptively analyses the evolution of the foreign currency indebtedness of NFCs in relation to firm level characteristics. Finally, chapter 4 analyses the effect of the foreign currency indebtedness on firm output; particularly capital expenditures. Specifically, chapter 4 seeks to understand whether the contractionary balance sheet effect of depreciation dominates the expected expansionary competitiveness effect of depreciation. The econometric results suggest that contractionary balance sheet effect of depreciation dominates the expected expansionary competitiveness effect; as a result, foreign currency indebted firms invest less following a depreciation. Furthermore, results indicate that firms with larger currency mismatches are constrained more than those firms with less currency mismatches in their balance sheets.