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Selective swap arrangements and the global financial crisis: Analysis and interpretation

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  • Aizenman, Joshua
  • Pasricha, Gurnain Kaur

Abstract

This paper explores the logic inducing the FED to extend unprecedented swap-lines to four emerging markets in September 2008. Exposure of US banks to EMs turned out to be the most important selection criterion for explaining the "selected four" swap-lines. This result is consistent with the outlined model. The FED swap-lines had relatively large short-run impact on the exchange rates of the selected EMs, but much smaller effect on the spreads. Yet, all the swap countries saw their exchange rate subsequently depreciate to a level lower than pre-swap rate, calling into question the long-run impact of the swap arrangements.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:reveco:v:19:y:2010:i:3:p:353-365
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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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