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Why Did the US Federal Reserve Unprecedentedly Offer Swap Lines to Emerging Market Economies during the Global Financial Crisis? Can We Expect Them Again in the Future?

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  • Chey Hyoung kyu

    (National Graduate Institute for Policy Studies)

Abstract

This paper provides a political economy analysis of why the US Federal Reserve unprecedentedly established temporary reciprocal swap lines with a select four emerging market economies during the global financial crisis of 2008-09, thus acting as global lender of last resort for US dollars. It argues that the swap lines reflected the great US need to reinforce its ties with major emerging market economies at that time, when a new global economic governance system had emerged—led by the Group of Twenty, which encompassed these economies among its members. Yet it also stresses the uniqueness of the international situation at that time, implying a low likelihood of the Federal Reserve providing swap lines for emerging market economies again in future systemic crises, and the need therefore to further strengthen the global financial safety net.

Suggested Citation

  • Chey Hyoung kyu, 2012. "Why Did the US Federal Reserve Unprecedentedly Offer Swap Lines to Emerging Market Economies during the Global Financial Crisis? Can We Expect Them Again in the Future?," GRIPS Discussion Papers 11-18, National Graduate Institute for Policy Studies.
    • Handle: RePEc:ngi:dpaper:11-18
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    1. Aizenman, Joshua & Pasricha, Gurnain, 2009. "Selective Swap Arrangements and the Global Financial Crisis: Analysis and Interpretation," Santa Cruz Department of Economics, Working Paper Series qt2vw7s14s, Department of Economics, UC Santa Cruz.
    2. 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.
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    Cited by:

    1. Hyoung-kyu Chey, 2013. "The Concepts, Consequences, and Determinants of Currency Internationalization," GRIPS Discussion Papers 13-03, National Graduate Institute for Policy Studies.
    2. Elena Seghezza, 2018. "Can swap line arrangements help solve the Triffin dilemma? How?," The World Economy, Wiley Blackwell, vol. 41(10), pages 2691-2708, October.
    3. Suman Bery & Filippo Biondi & Sybrand Brekelmans, 2019. "Twenty years of the G20: Has it changed global economic governance?," Russian Journal of Economics, ARPHA Platform, vol. 5(4), pages 412-440, December.

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