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We show that local central bank policies attenuate global financial cycle (GFC)’s spillovers. For identification, we exploit GFC shocks and Brazilian interventions in FX derivatives using three matched administrative registers: credit, foreign credit flows to banks, and employer-employee. After U.S. Federal Reserve Taper Tantrum (followed by strong Emerging Markets FX depreciation and volatility increase), Brazilian banks with larger ex-ante reliance on foreign debt strongly cut credit supply, thereby reducing firm-level employment. However, a large FX intervention program supplying derivatives against FX risks—hedger of last resort—halves the negative effects. Finally, a 2008-2015 panel exploiting GFC shocks and local related policies confirm these results.

Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit, and Global Financial Cycles