Paper #1648

Título:

Hedger of last resort: Evidence from Brazilian FX interventions, local credit, and global financial cycles

Autores:

Rodrigo Barbone Gonzalez, Dmitry Khametshin, José-Luis Peydró y Andrea Polo

Fecha:

Octubre 2018

Resumen:

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.

Palabras clave:

foreign exchange, monetary policy, central bank, bank credit, hedging

Códigos JEL:

E5, F3, G01, G21, G28

Área de investigación:

Finanzas y Contabilidad / Macroeconomía y Economía Internacional / Economía Laboral, Pública, de Desarrollo y de la Salud

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