FX intervention and domestic credit: Evidence from high-frequency micro data

Boris Hofmann, Hyun Song Shin and Mauricio Villamizar-Villegas

No 774, BIS Working Papers from Bank for International Settlements

Abstract: We employ a unique central bank dataset of foreign exchange operations to study the impact of FX intervention on domestic credit. Using loan-level data in the credit registry, we find that sterilized purchases of dollars by the central bank dampen the flow of new domestic corporate loans. The impact is particularly strong for borrowers with larger currency mismatches and for banks with thinner capital buffers. Our analysis sheds light on the role of FX intervention as part of the macroprudential toolkit during credit booms associated with episodes of capital inflow surges.

Keywords: FX intervention; credit registry; emerging markets; financial channel of exchange rates (search for similar items in EconPapers)
JEL-codes: E58 F31 F33 F41 G20 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2019-03
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Working Paper: FX intervention and domestic credit: evidence from high-frequency micro data (2019)
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