Research

Abstract:

Macroprudential FX regulations aim to reduce systemic currency-mismatch risks, yet their distributional effects on firms’ access to credit remain poorly understood. This paper studies Peru’s 2014 dedollarization policy, which sharply increased reserve requirements on banks’ dollar liabilities in proportion to their dollar lending to nontradable firms. Exploiting cross-sectional variation in banks’ exposure to the policy and using administrative loan-level data covering the universe of firms, I find that moving from the median to the 75th percentile of exposure reduces the growth of new total loans---the sum of dollar and local currency loans---, by roughly 10 percentage points for micro and small firms, with no significant effects for medium or large firms. Larger firms absorb the contraction in dollar credit by reallocating borrowing across banks and into local currency credit, whereas micro firms experience significant declines in both dollar and total credit, higher borrowing costs, and modest employment losses. The results highlight a trade-off between macroprudential objectives and credit access for small firms.

Abstract:

This paper investigates the granular transmission of U.S. monetary policy shocks to deviations from the uncovered interest rate parity (UIPDs) in emerging economies. Using a comprehensive dataset from Chile that accounts for firm-bank relationships and the time-variant characteristics of both firms and banks, we uncover several key findings: (1) Shocks to the federal funds rate (FFR) increase banks' costs of foreign borrowing. (2) These higher credit costs disproportionately affect small firms, raising their UIPDs more than for large firms. (3) This size-differentiated impact stems from the relatively higher interest rates on domestic currency loans faced by small firms. (4) In contrast, interest rates on dollar-denominated loans respond homogeneously across all firms. (5) We find no differential effect on loan quantities, suggesting an active role of credit supply and demand. We rationalize these findings with a small open economy model of corporate default that incorporates heterogeneous firms borrowing from domestic banks in both foreign and domestic currencies. In our model, a higher FFR reduces the marginal cost of defaulting on domestic-currency debt for small firms more than for large firms.

Abstract:

We study whether and how domestic banking regulations propagate internationally through trade linkages. We develop a stylized framework in which exporters respond to a credit-driven contraction in import demand through two margins: attenuating the shock by extending trade credit to constrained importers and reallocating exports across destinations. We test these mechanisms exploiting a large and unexpected increase in loan-loss provisioning requirements imposed on Spanish banks in 2012. Combining bank–firm credit registry data, confidential firm-level trade transactions, and global bilateral trade flows, we show that the regulation reduced credit supply to importers and led to a contraction in Spanish imports, generating spillovers to trading partners. Consistent with the model, exporters in financially developed economies offset the shock, while exporters in less developed financial systems experienced larger declines, particularly when trade costs are high. Exporters of homogeneous products reallocate across markets, whereas differentiated products exhibit limited reallocation and larger export declines.