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

Boris Hofmann () and Hyun Song Shin

No 774, BIS Working Papers from Bank for International Settlements

Abstract: We employ a rarely available high-frequency micro data set to study the impact of foreign exchange intervention on domestic credit growth. We find that sterilised purchases of dollars by the central bank dampens the flow of new domestic corporate loans in Colombia. Slowing the pace of currency appreciation plays a key role in dampening credit expansion. Our analysis sheds light on the role of FX intervention as part of the financial stability-oriented policy response to credit booms associated with 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)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2019-03
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