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The asymmetric effect of international swap lines on banks in emerging markets

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  • Andrieș, Alin Marius
  • Fischer, Andreas M.
  • Yeșin, Pınar

Abstract

This paper investigates the effect of international swap lines on stock returns using data from banks in emerging markets. The analysis first shows that swap lines by the Swiss National Bank (SNB) had a positive impact on bank stocks in Central and Eastern Europe. It then highlights the importance of individual bank characteristics in identifying the asymmetric effect of swap lines on bank stocks. Bank-level evidence suggests that stock prices of local and less-well capitalized banks as well as banks with high foreign currency exposures and high reliance on short-term funding responded more strongly to SNB swap lines. This new evidence is consistent with the view that swap lines not only enhanced market liquidity but also reduced risks associated with micro-prudential issues.

Suggested Citation

  • Andrieș, Alin Marius & Fischer, Andreas M. & Yeșin, Pınar, 2017. "The asymmetric effect of international swap lines on banks in emerging markets," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 215-234.
    • Handle: RePEc:eee:jbfina:v:75:y:2017:i:c:p:215-234
    DOI: 10.1016/j.jbankfin.2016.11.021
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    Cited by:

    1. Eguren-Martin, Fernando, 2020. "Dollar shortages and central bank swap lines," Bank of England working papers 879, Bank of England.
    2. Mittal, Amit & Garg, Ajay Kumar, 2021. "Bank stocks inform higher growth—A System GMM analysis of ten emerging markets in Asia," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 210-220.
    3. Yu, Ziliang & Liu, Xiaomeng & Liu, Zhuqing & Li, Yang, 2023. "Central bank swap arrangements and exchange rate volatility: Evidence from China," Emerging Markets Review, Elsevier, vol. 56(C).
    4. Fischer, Andreas M. & Yeşin, Pınar, 2022. "Foreign currency loan conversions and currency mismatches," Journal of International Money and Finance, Elsevier, vol. 122(C).
    5. Mittal, Amit & Garg, Ajay Kumar, 2018. "Bank stocks inform higher growth – A System GMM analysis of ten emerging markets in Asia," MPRA Paper 98253, University Library of Munich, Germany.
    6. D. Essers & E. Vincent, 2017. "The global financial safety net :In need of repair ?," Economic Review, National Bank of Belgium, issue ii, pages 87-112, september.

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    More about this item

    Keywords

    Swap lines; Foreign currency loans; Bank stocks; Emerging markets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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