spreads opening up in these markets provide an incentive for cross-border financial flows and corresponding hedging demand …

We consider the effect of hedging with foreign currency derivatives on Brazilian firms in the period 1997 through 2004 … higher than non-user firms. Hedging with currency derivatives allows firms to sustain larger capital investments, and also …, Scharfstein, and Stein (1993), at a time when capital in the economy as a whole is scarce. We further show that hedging increases …