Hedger of last resort: Evidence from Brazilian FX interventions, local credit, and global financial cycles
Rodrigo Gonzalez,
Dmitry Khametshin,
Jose-Luis Peydro and
Andrea Polo
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Abstract:
We show that FX interventions attenuate global financial cycle (GFC)'s spillovers. We exploit GFC shocks and Brazilian central bank interventions in FX derivatives using three matched 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 of last 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: 2018-10, Revised 2022-11
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)
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Related works:
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)
Working Paper: Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit and Global Financial Cycles (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1648
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