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FX intervention and domestic credit in a partially dollarized economy: Evidence using microdata from Peru

Author

Listed:
  • Ceron, Marcos

    (Banco Central de Reserva del Perú)

  • Nivin, Rafael

    (Banco Central de Reserva del Perú)

  • Yamunaque, Diego

    (Banco Central de Reserva del Perú)

Abstract

In this work we study the impact of FX interventions on Credit growth in Peru. Using Panel data at the firm-bank level from the Peruvian Credit Registry we find that purchases of dollars by the Central Bank are associated with reductions on the stock of credit held by Medium, Big and Corporate Firms during periods of substantial capital inflows in the Peruvian economy. We also found that the impact is stronger for firms with a higher level of debt dollarization. These results suggest that FX interventions can be seen as an additional tool for Financial stability, especially in times of large inflows of capital.

Suggested Citation

  • Ceron, Marcos & Nivin, Rafael & Yamunaque, Diego, 2023. "FX intervention and domestic credit in a partially dollarized economy: Evidence using microdata from Peru," Working Papers 2023-009, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2023-009
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    References listed on IDEAS

    as
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    4. Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.
    5. Olivier Blanchard & Gustavo Adler & Irineu de Carvalho Filho, 2015. "Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks?," Working Paper Series WP15-18, Peterson Institute for International Economics.
    6. Boris Hofmann & Hyun Song Shin & Mauricio Villamizar-Villegas, 2019. "FX intervention and domestic credit: evidence from high-frequency micro data," Borradores de Economia 1069, Banco de la Republica de Colombia.
    7. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, December.
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    More about this item

    Keywords

    FX intervention; Credit registry; Emerging markets; Credit growth.;
    All these keywords.

    JEL classification:

    • 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
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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