The Market of Foreign Exchange Hedge in Brazil: Reactions of Financial Institutions to Interventions of the Central Bank
AbstractBetween 1999 and 2002, Brazil's Central Bank sold expressive amounts of dollar indexed debt and foreign exchange swaps. This paper shows that in periods of high volatility of the exchange rate, first semester of 1999 and second semester of 2002, the Central Bank of Brazil increased the foreign exchange hedge, but the financial institutions used this to reduce their foreign exchange exposure. In contrast, increases in foreign hedge during periods of low volatility of the exchange rate were transferred to the productive sector.
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Bibliographic InfoPaper provided by Economics Research Group, IBMEC Business School - Rio de Janeiro in its series IBMEC RJ Economics Discussion Papers with number 2005-13.
Date of creation: 15 Dec 2005
Date of revision:
foreign exchange swaps; central bank interventions; foreign exchange risk;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-CBA-2006-01-01 (Central Banking)
- NEP-FMK-2006-01-01 (Financial Markets)
- NEP-IFN-2006-01-01 (International Finance)
- NEP-MAC-2006-01-01 (Macroeconomics)
- NEP-MON-2006-01-01 (Monetary Economics)
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- Mark R. Stone & W. Christopher Walker & Yosuke Yasui, 2009. "From Lombard Street to Avenida Paulista: Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008-09," IMF Working Papers 09/259, International Monetary Fund.
- Tabak, Benjamin M. & Lima, Eduardo J.A., 2009. "Market efficiency of Brazilian exchange rate: Evidence from variance ratio statistics and technical trading rules," European Journal of Operational Research, Elsevier, vol. 194(3), pages 814-820, May.
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