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Central bank swap line effectiveness during the euro area sovereign debt crisis

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  • Moessner, Richhild
  • Allen, William A.

Abstract

The Federal Reserve re-established a swap line with the European Central Bank in response to the international liquidity stresses created by the euro area sovereign debt crisis. We examine the swap line's effectiveness in addressing these stresses in 2010–11. We find that announcements about the swap line had a significant effect in reducing euro-dollar FX swap spreads during the 2010–11 crisis, but that the swap line only had limited effectiveness in alleviating the stresses, probably owing to some stigma being attached to its use.

Suggested Citation

  • Moessner, Richhild & Allen, William A., 2013. "Central bank swap line effectiveness during the euro area sovereign debt crisis," Journal of International Money and Finance, Elsevier, vol. 35(C), pages 167-178.
  • Handle: RePEc:eee:jimfin:v:35:y:2013:i:c:p:167-178
    DOI: 10.1016/j.jimonfin.2013.03.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alin Marius Andries & Andreas M. Fischer & Pinar Yesin, 2015. "The impact of international swap lines on stock returns of banks in emerging markets," Working Papers 16.01, Swiss National Bank, Study Center Gerzensee.
    2. Fukuda, Shin-ichi, 2016. "Strong sterling pound and weak European currencies in the crises: Evidence from covered interest parity of secured rates," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 109-122.
    3. William A. Allen & Gabriele Galati & Richhild Moessner & William Nelson, 2017. "Central bank swap lines and CIP deviations," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 22(4), pages 394-402, October.
    4. Yu-Fu Chen & Michael Funke & Richhild Moessner, 2017. "Informal one-sided target zone model and the Swiss franc," BIS Working Papers 660, Bank for International Settlements.
    5. repec:eee:jimfin:v:74:y:2017:i:c:p:301-317 is not listed on IDEAS
    6. repec:eee:jbfina:v:83:y:2017:i:c:p:153-172 is not listed on IDEAS
    7. 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.
    8. Fukuda, Shin-ichi & Tanaka, Mariko, 2017. "Monetary policy and covered interest parity in the post GFC period: Evidence from the Australian dollar and the NZ dollar," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 301-317.
    9. Petra Gerlach-Kristen & Richhild Moessner & Rina Rosenblatt-Wisch, 2017. "Computing long‐term market inflation expectations for countries without inflation expectation markets," Working Papers 2017-09, Swiss National Bank.

    More about this item

    Keywords

    Financial crisis; International liquidity; Foreign exchange swaps; Central bank swap lines;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G01 - Financial Economics - - General - - - Financial Crises

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