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Macroprudential FX Regulations and Small Firms: Unintended Consequences for Credit Growth

Author

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  • María Alejandra Amado

    (BANCO DE ESPAÑA)

Abstract

Macroprudential FX regulations aim to reduce systemic currency-mismatch risks, yet their distributional effects on firms’ access to credit remain poorly understood. This paper studies Peru’s 2014 dedollarization policy, which sharply increased reserve requirements on banks’ foreign-currency liabilities in proportion to their dollar lending to nontradable firms. Exploiting cross-sectional variation in banks’ exposure and using administrative loan-level data covering the universe of firms, I find that moving from the median to the 75th percentile of exposure reduces growth in total new loans by roughly 10 percentage points for micro and small firms, with no significant effects for medium or large firms. Larger firms absorb the shock by reallocating borrowing across banks and into local currency credit, whereas micro firms experience sharp declines in both dollar and total credit, higher borrowing costs, and modest employment losses. The results highlight a trade-off between macroprudential objectives and credit access for small firms.

Suggested Citation

  • María Alejandra Amado, 2026. "Macroprudential FX Regulations and Small Firms: Unintended Consequences for Credit Growth," Working Papers 2604, Banco de España.
    • Handle: RePEc:bde:wpaper:2604
    DOI: https://doi.org/10.53479/42365
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    References listed on IDEAS

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    1. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    2. Gutierrez, Bryan & Ivashina, Victoria & Salomao, Juliana, 2023. "Why is dollar debt Cheaper? Evidence from Peru," Journal of Financial Economics, Elsevier, vol. 148(3), pages 245-272.
    3. Chen, Sophia & Lee, Do, 2023. "Small and vulnerable: SME productivity in the great productivity slowdown," Journal of Financial Economics, Elsevier, vol. 147(1), pages 49-74.
    4. Husnu C. Dalgic, 2024. "Financial Dollarization In Emerging Markets: An Insurance Arrangement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1189-1219, August.
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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