Özet:

The phenomenon of dollarization, also known as currency substitution, is defined as the preference of a country's citizens to use foreign currency instead of national currency or together with national currency in economic transactions in high inflation and uncertainty environments. The share of liability (debt) dollarization, which expresses the amount of debt in foreign currency, in total liabilities is an important economic indicator in developing countries. The rise in the exchange rate leads to an increase in foreign exchange liabilities, resulting in negative effects on debt management and investments in the countries. The effect of the change in exchange rates on the company's balance sheets and the resulting change in investments are known as the "balance sheet effect". In this study, the effect of foreign currency borrowing, namely liability dollarization, on investment in the manufacturing sector in Turkey for the period 2010-2021 is analyzed with the two-stage system GMM method. Micro variables as firm-specific and macro variables related to the economy were added to the created model as control variables. According to the empirical findings, while changes in firm size and tangible fixed assets, which are firm-specific micro variables, affect firm investments in the same direction, the increase in liability dollarization, which refers to foreign currency borrowing, negatively affects investments. According to the results of this study, in which the negative balance sheet effect was determined, the increase in foreign currency debts of companies in the Turkish manufacturing industry sector in the 2010-2021 period reduces their investments.

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