Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/268908
Year of Publication: 
2022
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
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.
Subjects: 
foreign exchange
monetary policy
central bank
bank credit
hedging
JEL: 
E5
F3
G01
G2
Document Type: 
Working Paper

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