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The global network of liquidity lines

Author

Listed:
  • Bahaj, Saleem
  • Fuchs, Marie
  • Reis, Ricardo

Abstract

At the end of 2025, there were 177 cross-border liquidity lines between central banks connecting countries that accounted for 81% of world GDP. This paper maps the evolution of these arrangements since 2000. We show that the lines form a network through which banks can indirectly obtain access to the USD even when their central bank has no agreement with the Federal Reserve. These indirect connections give the People’s Bank of China a central role and show the fragility of liquidity provision to geopolitical tensions. We present cross-country evidence that the indirect connections reduce CIP deviations at the tails, and causal evidence that liquidity lines are substitutes to FX reserves.

Suggested Citation

  • Bahaj, Saleem & Fuchs, Marie & Reis, Ricardo, 2026. "The global network of liquidity lines," LSE Research Online Documents on Economics 137636, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:137636
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    File URL: https://researchonline.lse.ac.uk/id/eprint/137636/
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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