International Reserve Management and Firm Investment in Emerging Market Economies / Joshua Aizenman, Yin-Wong Cheung, Xingwang Qian.

Format:

Book

Author/Creator:

Aizenman, Joshua.

Contributor:

National Bureau of Economic Research.

Cheung, Yin-Wong.

Qian, Xingwang.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29303.

NBER working paper series no. w29303

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm-level data from 46 EMEs from 2000 to 2018, we document four findings. First, active IRM is found to affect firm investment positively. The effect strengthens when the size of adverse external financial shocks increases. Second, financially constrained firms, compared to unconstrained ones, are less responsive to active IRM. Third, we quantify the causal effect of IRM on firm investment and find that 30% of it is mediated through the country spread channel. Fourth, capital controls and exchange rate management complement the IRM.

Notes:

Print version record

September 2021.