Currency crisis in Brazil leads to significant investment reductions for firms.
Balance sheet losses from currency depreciations in Brazil's 2002 crisis affected firms' investments. Firms with large currency mismatches before the crisis reduced their investment rates more than others. The depreciation boosted exporters' revenue, but those with currency mismatches cut investments significantly more than other exporters. This shows that negative balance sheet effects in currency crises can have a big impact on firms' investment decisions.