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

  • Aizenman, Joshua
  • Pasricha, Gurnain Kaur

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.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 19 (2010)
Issue (Month): 3 (June)
Pages: 353-365

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