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International Reserve Management and Firm Investment in Emerging Market Economies

Joshua Aizenman, Yin-Wong Cheung and Xingwang Qian

No 29303, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm-level data from 46 EMEs from 2000 to 2018, we document three findings. First, active IRM is found to affect firm investment positively. The effect strengthens when the magnitude of adverse external financial shocks increases. Second, financially constrained firms, compared to unconstrained ones, are less responsive to active IRM. Third, we find that 30% of the causal effect of IRM on firm investment is mediated through the country credit spread channel.

JEL-codes: F36 F42 F61 G31 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-fdg, nep-ifn, nep-mon and nep-opm
Note: IFM
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