Journal of Finance Vol. 81 No. 4 2026

Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit, and Global Financial Cycles

Rodrigo Barbone Gonzalez^1,2; Dmitry Khametshin³; José-Luis Peydró^4,5,6; Andrea Polo

¹ Central Bank of Brazil · ² Bank for International Settlements · ³ Bank of Spain · ⁴ Universitat Pompeu Fabra · ⁵ Centre for Economic Policy Research · ⁶ Imperial College London

Abstract

We show that FX interventions can be effective, particularly in attenuating global financial spillovers. We exploit global financial shocks and Brazilian central bank interventions in FX derivatives using three matched administrative registers: bank credit (to firms), foreign credit to banks, and employer‐employees. After the U.S. Taper Tantrum (followed by emerging markets' FX turbulence), Brazilian banks with more foreign debt cut credit supply, reducing firm‐level employment. A subsequent large policy intervention supplying derivatives against FX risks — hedger of last resort — halved the negative effects. A 2008 to 2015 panel exploiting global FX shocks and local FX interventions confirms the results and the hedging channel. However, the FX policy entails fiscal and moral hazard costs.

DOI

10.1111/jofi.70054

Volume

81

Issue

4

Pages

2331-2370

Language

en

Sources

openalex crossref

Cite

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