FX Intervention and Domestic Credit: Evidence from High-Frequency Micro Data

36 Pages Posted: 19 Mar 2019

See all articles by Boris Hofmann

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Hyun Song Shin

Bank for International Settlements (BIS)

Mauricio Villamizar‐Villegas

Central Bank of Colombia

Date Written: March 18, 2019

Abstract

We employ a rarely available high-frequency micro dataset to study the impact of foreign exchange intervention on domestic credit growth. We find that sterilised purchases of dollars by the central bank dampens the flow of new domestic corporate loans in Colombia. Slowing the pace of currency appreciation plays a key role in dampening credit expansion. Our analysis sheds light on the role of FX intervention as part of the financial stability-oriented policy response to credit booms associated with capital inflow surges.

Keywords: FX Intervention, Credit Registry, Emerging Markets, Financial Channel of Exchange Rates

JEL Classification: E58, F31, F33, F41, G20

Suggested Citation

Hofmann, Boris and Shin, Hyun Song and Villamizar‐Villegas, Mauricio, FX Intervention and Domestic Credit: Evidence from High-Frequency Micro Data (March 18, 2019). BIS Working Paper No. 774. Available at SSRN: https://ssrn.com/abstract=3355009

Boris Hofmann (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

Mauricio Villamizar‐Villegas

Central Bank of Colombia ( email )

Carrera 7 No. 14-78 Piso 11
Bogotá
Colombia

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