Central bank dollar swap lines and overseas dollar funding costs
AbstractIn the decade prior to the financial crisis, foreign banks’ exposure to U.S.-dollar-denominated assets rose dramatically. When the crisis hit in 2007, the banks’ access to dollar funding came under severe duress, with potentially dire consequences for global financial markets that could also spread to U.S. markets. The Federal Reserve responded in December 2007 by establishing temporary reciprocal currency swap lines, or facilities, with foreign central banks designed to ameliorate dollar funding stresses overseas. Drawing on rigorous analysis of the swaps, as well as insights of other economic studies and anecdotal accounts of market participants, this paper concludes that the lines were effective in reducing dollar funding costs abroad and stresses in the money markets. Furthermore, the facilities have been an integral part of the central bank toolbox for managing systemic liquidity disruptions as well as represent an important example of global policy cooperation.> In this paper, authors Linda S. Goldberg, Craig Kennedy and Jason Miu describe the events leading up to the introduction of the dollar swap lines, discuss changes to the facilities as funding conditions evolved and consider the facilities’ effects on market activity. ; Title of Special Issue: Federal Reserve Policy Responses to the Financial Crisis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of New York in its journal Economic Policy Review.
Volume (Year): (2011)
Issue (Month): May ()
Other versions of this item:
- Linda S. Goldberg & Craig Kennedy & Jason Miu, 2010. "Central bank dollar swap lines and overseas dollar funding costs," Staff Reports 429, Federal Reserve Bank of New York.
- Linda S. Goldberg & Craig Kennedy & Jason Miu, 2010. "Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs," NBER Working Papers 15763, National Bureau of Economic Research, Inc.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Baba, Naohiko & Packer, Frank, 2009. "From turmoil to crisis: Dislocations in the FX swap market before and after the failure of Lehman Brothers," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1350-1374, December.
- John B. Taylor & John C. Williams, 2008.
"A black swan in the money market,"
Working Paper Series
2008-04, Federal Reserve Bank of San Francisco.
- John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
- John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
- Naohiko Baba & Frank Packer, 2009. "From turmoil to crisis: dislocations in the FX swap market before and after the failure of Lehman Brothers," BIS Working Papers 285, Bank for International Settlements.
- Aizenman, Joshua & Pasricha, Gurnain, 2009.
"Selective Swap Arrangements and the Global Financial Crisis: Analysis and Interpretation,"
Santa Cruz Department of Economics, Working Paper Series
qt2vw7s14s, Department of Economics, UC Santa Cruz.
- Aizenman, Joshua & Pasricha, Gurnain Kaur, 2010. "Selective swap arrangements and the global financial crisis: Analysis and interpretation," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 353-365, June.
- Joshua Aizenman & Gurnain Kaur Pasricha, 2009. "Selective Swap Arrangements and the Global Financial Crisis: Analysis and Interpretation," NBER Working Papers 14821, National Bureau of Economic Research, Inc.
- James McAndrews & Asani Sarkar & Zhenyu Wang, 2008. "The effect of the Term Auction Facility on the London Inter-Bank Offered Rate," Staff Reports 335, Federal Reserve Bank of New York.
- Niall Coffey & Warren B. Hrung & Asani Sarkar, 2009. "Capital constraints, counterparty risk, and deviations from covered interest rate parity," Staff Reports 393, Federal Reserve Bank of New York.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If references are entirely missing, you can add them using this form.