Data and Code for "Central Banks as Dollar Lenders of Last Resort: Implications for Regulation and Reserve Holdings"

Principal Investigator(s):  View help for Principal Investigator(s) Jeremy Stein, Harvard University. Department of Economics

Version:  View help for Version V1

Name File Type Size Last Modified
Figures CBLOLR.xlsx application/vnd.openxmlformats-officedocument.spreadsheetml.sheet 95.9 KB 01/28/2025 09:32:AM
Readme - Central Banks as Dollar Lenders of Last Resort.pdf application/pdf 103.8 KB 01/28/2025 09:40:AM
cblolr_AEJrevisionJune2024.dta application/x-stata-dta 749.2 KB 01/28/2025 09:32:AM
table1.do text/plain 2.3 KB 01/28/2025 09:32:AM
table2.do text/plain 2.8 KB 01/28/2025 09:32:AM
tableA3.do text/plain 2.4 KB 01/28/2025 09:32:AM
tableA3.dta application/x-stata-dta 694.9 KB 01/28/2025 09:32:AM

Project Citation: 

Stein, Jeremy. Data and Code for “Central Banks as Dollar Lenders of Last Resort: Implications for Regulation and Reserve Holdings.” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2025-01-28. https://doi.org/10.3886/E216901V1

Project Description

Summary:  View help for Summary This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 56 countries, central bank holdings of dollar reserves are correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors, controlling for a number of known covariates of reserve accumulation. We then build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, in two ways: (i) by imposing ex ante financial regulations such as bank capital requirements; or (ii) by building a stockpile of dollar reserves that allow it to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may over-accumulate dollar reserves, relative to what a global planner would choose. This is because, in the presence of imperfect regulation of currency mismatch, individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to further increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may therefore prefer higher capital requirements and reduced holdings of dollar reserves.

Scope of Project

Subject Terms:  View help for Subject Terms Central Banks; Financial Regulation; Dollar Reserves; Mismatched capital structure; Nonfinancial firms
Geographic Coverage:  View help for Geographic Coverage Global
Time Period(s):  View help for Time Period(s) 2013 – 2020
Collection Date(s):  View help for Collection Date(s) 2021 – 2024
Universe:  View help for Universe Nonfinancial corporates and central banks in 56 countries from all regions of the world, observed between 2013 and 2020 inclusive. 
Data Type(s):  View help for Data Type(s) aggregate data; other

Methodology

Data Source:  View help for Data Source 1. International Monetary Fund (IMF) databases including International Financial Statistics at Data.IMF.org, 2013-2020
2. World Bank databases at Data.worldbank.org, 2013-2020
3. Bank for International Settlements data, 2013-20, Table A6.1
4. Bank for International Settlements data, Restricted Locational Banking Statistics
5. Public downloadable data on currency composition of foreign reserves: IMF 2020 (Reserve Currencies in an Evolving International Monetary System), Chinn, Ito and McCauley (2021) (web.pdx.edu/~ito/IM_dataset.htm), State Administration of Foreign Exchange (https://www.safe.gov.cn/en/), Chinn and Ito (2006) (web.pdx.edu/~ito/Chinn-Ito_website.htm)
Unit(s) of Observation:  View help for Unit(s) of Observation Country-year is the unit of observation
Geographic Unit:  View help for Geographic Unit Country

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V1 [2025-01-28]

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