Forex interventions can lead to banking credit boom, paper finds
FX interventions aimed at cooling currency appreciation can stimulate bank lending
Large-scale forex intervention in emerging market economies aimed at resisting currency appreciation can lead to an expansion in credit – running contrary to the aims of the monetary authority, according to a new working paper from the Bank for International Settlements (BIS).
In Foreign exchange intervention and the banking system balance sheet in emerging market economies, Blaise Gadanecz, Aaron Mehrotra and Madhusudan Mohanty, of the BIS's monetary and economic department, empirically
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