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The Evolution of the Federal Reserve Swap Lines since 1962

Listed author(s):
  • Michael D Bordo
  • Owen F Humpage
  • Anna J Schwartz

This paper describes the evolution of the Federal Reserve’s swap lines from their inception in 1962 as a mechanism to forestall claims on U.S gold reserves under Bretton Woods to a means of extending emergency dollar liquidity during the Great Recession. It describes the Federal Reserve’s successes and failures and argues that swaps calm crisis situations by both supplementing foreign countries’ dollar reserves and by signaling central-bank cooperation. The paper shows how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process.

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Article provided by Palgrave Macmillan & International Monetary Fund in its journal IMF Economic Review.

Volume (Year): 63 (2015)
Issue (Month): 2 (September)
Pages: 353-372

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Handle: RePEc:pal:imfecr:v:63:y:2015:i:2:p:353-372
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Order Information: Web: http://www.springer.com/economics/journal/41308/PS2

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  1. 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.
  2. John H. Makin, 1971. "Swaps and Roosa Bonds as an Index of the Cost of Cooperation in the "Crisis Zone"," The Quarterly Journal of Economics, Oxford University Press, vol. 85(2), pages 349-356.
  3. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
  4. Baillie, Richard T. & Humpage, Owen F. & Osterberg, William P., 2000. "Intervention from an information perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 407-421, December.
  5. Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2011. "International reserves and swap lines: Substitutes or complements?," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 5-18, January.
  6. Catharina J. Hooyman, 1993. "The Use of Foreign Exchange Swaps by Central Banks; A Survey," IMF Working Papers 93/64, International Monetary Fund.
  7. Eswar S. Prasad, 2015. "The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance," Economics Books, Princeton University Press, edition 1, number 10182-2, March.
  8. Linda S. Goldberg & Craig Kennedy & Jason Miu, 2011. "Central bank dollar swap lines and overseas dollar funding costs," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 3-20.
  9. Marvin Goodfriend, 2001. "Why we need an "accord" for Federal Reserve credit policy : a note," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 23-32.
  10. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2012. "The Federal Reserve as an Informed Foreign Exchange Trader: 1973–1995," International Journal of Central Banking, International Journal of Central Banking, vol. 8(1), pages 127-160, March.
  11. Donald B. Adams & Dale W. Henderson, 1983. "Definition and measurement of exchange market intervention," Staff Studies 126, Board of Governors of the Federal Reserve System (U.S.).
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