Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit and Global Financial Cycles

Andrea Polo, Rodrigo Gonzalez, Dmitry Khametshin and Peydró, José-Luis
Authors registered in the RePEc Author Service: Jose-Luis Peydro

No 12817, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that local policy attenuates global financial cycle (GFC)’s spillovers. We exploit GFC shocks and Brazilian central bank interventions in FX derivatives using threematched administrative registers: credit, foreign credit to banks, and employer-employee. After U.S. Taper Tantrum (followed by Emerging Markets FX turbulence), Brazilian banks with more foreign debt cut credit supply, thereby reducing firm-level employment. A subsequent large policy intervention supplying derivatives against FX risks—hedger oflast resort—halves the negative effects. A 2008-2015 panel exploiting GFC shocks and FX interventions confirms these results and the hedging channel. However, the policy entails fiscal and moral hazard costs.

Keywords: Foreign exchange; Monetary policy; Central bank; Bank credit; Hedging (search for similar items in EconPapers)
JEL-codes: E5 F3 G01 G21 G28 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Hedger of last resort: Evidence from Brazilian FX interventions, local credit, and global financial cycles (2022)
Working Paper: Hedger of Last Resort: Evidence from Brazil on FX Interventions, Local Credit and Global Financial Cycles (2022)
Working Paper: Hedger of last resort: evidence from Brazilian FX interventions, local credit, and global financial cycles (2020)
Working Paper: Hedger of Last Resort: evidence from Brazilian FX interventions, local credit, and global financial cycles (2019)
Working Paper: Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit, and Global Financial Cycles (2019)
Working Paper: Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit and Global Financial Cycles (2019)
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