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From Lombard Street to Avenida Paulista; Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008–09

Author

Listed:
  • Mark R. Stone
  • W. Christopher Walker
  • Yosuke Yasui

Abstract

The provision of foreign exchange liquidity by emerging market central banks during the global shock of 2008-09 departs from the domestic liquidity lender of last resort role described by Bagehot in his classic "Lombard Street." This paper documents and analyzes the foreign exchange liquidity providing measures of the Banco Central do Brasil (BCB) in response to varied market stresses. These measures appear to have reduced the relative onshore cost of dollar liquidity on impact and seemed to stabilize market expectations of exchange rate volatility. The results suggest that foreign exchange liquidity easing operations may become a standard central bank tool.

Suggested Citation

  • Mark R. Stone & W. Christopher Walker & Yosuke Yasui, 2009. "From Lombard Street to Avenida Paulista; Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008–09," IMF Working Papers 09/259, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/259
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    References listed on IDEAS

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    Cited by:

    1. repec:mtp:titles:0262037165 is not listed on IDEAS
    2. repec:bis:bisqtr:1709e is not listed on IDEAS
    3. Mark R. Stone & Etienne B Yehoue & Kotaro Ishi, 2009. "Unconventional Central Bank Measures for Emerging Economies," IMF Working Papers 09/226, International Monetary Fund.
    4. Etienne B Yehoue, 2009. "Emerging Economy Responses to the Global Financial Crisis of 2007–09 - An Empirical Analysis of the Liquidity Easing Measures," IMF Working Papers 09/265, International Monetary Fund.
    5. Barbedo, Claudio H.S. & de Melo, Eduardo F.L., 2012. "Joint dynamics of Brazilian interest rate yields and macro variables under a no-arbitrage restriction," Journal of Economics and Business, Elsevier, vol. 64(5), pages 364-376.
    6. International Monetary Fund, 2017. "Sweden; Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight Framework and Management," IMF Staff Country Reports 13/311, International Monetary Fund.

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