Abstract

We examine the nexus between the staggering rise in the central bank’s forex reserves and corporate borrowings denominated in foreign currency. We use dynamic panel data models by drawing novel data of Indian firms to probe the moral hazard hypothesis. Our investigation shows no evidence that forex reserves act as an implicit guarantee for the corporate sectors to borrow in foreign currency in the long run. The ARDL reinforces our firm-level estimates. Albeit, the VAR analysis does not rule out causality between forex reserves and ECB in the short run. We show that forex reserves mainly help manage capital flows into the economy and maintain domestic monetary stability. The accumulation of forex reserves implies mercantilist motives of the central bank to reduce imbalances in the economy by keeping the exchange rate depreciated and domestic exports competitive.

摘要

我们研究了央行外汇储备的惊人增长与以外币计价的企业借款之间的关系。我们通过绘制印度公司的新数据来使用动态面板数据模型来探索道德风险假设。我们的调查显示，没有证据表明外汇储备可以作为企业部门长期借入外币的隐性担保。ARDL 加强了我们对公司层面的估计。尽管如此，VAR分析并未排除短期内外汇储备与欧洲央行之间的因果关系。我们表明，外汇储备主要有助于管理资本流入经济和维持国内货币稳定。