The Market of Foreign Exchange Hedge in Brazil: Reactions of Financial Institutions to Interventions of the Central Bank

Fernando de Oliveira and Walter Novaes
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Fernando de Oliveira: IBMEC Business School - Rio de Janeiro and Central Bank of Brazil

No 2005-13, IBMEC RJ Economics Discussion Papers from Economics Research Group, IBMEC Business School - Rio de Janeiro

Abstract: Between 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.

Keywords: foreign exchange swaps; central bank interventions; foreign exchange risk (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
Date: 2005-12-15
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-ifn, nep-mac and nep-mon
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ibr:dpaper:2005-13

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