TY - BOOK ID - 133499949 TI - Do FX Interventions Lead to Higher FX Debt? Evidence from Firm-Level Data AU - Kim, Minsuk. AU - Mano, Rui. AU - Mrkaic, Mico. PY - 2020 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Foreign Exchange KW - Money and Monetary Policy KW - International Lending and Debt Problems KW - Portfolio Choice KW - Investment Decisions KW - Economic Development: Financial Markets KW - Saving and Capital Investment KW - Corporate Finance and Governance KW - Monetary Systems KW - Standards KW - Regimes KW - Government and the Monetary System KW - Payment Systems KW - Currency KW - Foreign exchange KW - Monetary economics KW - Exchange rate arrangements KW - Exchange rates KW - Currencies KW - Exchange rate flexibility KW - Money KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:133499949 AB - Central banks often buy or sell reserves-–-so called FX interventions (FXIs)---to dampen sharp exchange rate movements caused by volatile capital flows. At the same time, these interventions may entail unintended side effects. In this paper, we investigate whether FXIs incentivize firms to take on more unhedged FX debt, thereby increasing medium-term corporate vulnerabilities. Using a novel dataset with close to 5,000 nonfinancial firms across 19 emerging markets covering 2002--2017, we find that the firm-level share of FX debt rises following intensive use of FXIs, particularly for non-exporting firms in shallow financial markets with no FX debt to begin with. The magnitude of this effect is economically significant, with one standard deviation increase in FXI leading to an average 2 percentage points increase in the FX debt share. For reference, the median share of FX debt in the sample is zero. ER -