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Elasticity and Discipline in the Global Swap Network

Author

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  • Perry Mehrling

    () (Barnard College)

Abstract

This paper sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis. At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, a further network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.

Suggested Citation

  • Perry Mehrling, 2015. "Elasticity and Discipline in the Global Swap Network," Working Papers Series 27, Institute for New Economic Thinking.
  • Handle: RePEc:thk:wpaper:27
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    File URL: http://ineteconomics.org/uploads/papers/WP27-Mehrling.pdf
    File Function: First version, 2015
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    References listed on IDEAS

    as
    1. Tommaso Mancini Griffoli & Angelo Ranaldo, 2010. "Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity," Working Papers 2010-14, Swiss National Bank.
    2. Yu, Yongding, 2012. "Revisiting the Internationalization of the Yuan," ADBI Working Papers 366, Asian Development Bank Institute.
    3. Naohiko Baba & Frank Packer & Teppei Nagano, 2008. "The spillover of money market turbulence to FX swap and cross-currency swap markets," BIS Quarterly Review, Bank for International Settlements, March.
    4. Yongding Yu, 2012. "Revisiting the Internationalization of the Yuan," Finance Working Papers 23311, East Asian Bureau of Economic Research.
    5. Mehrling, Perry, 2013. "Essential hybridity: A money view of FX," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 355-363.
    6. Patrick McGuire & Goetz von Peter, 2012. "The Dollar Shortage in Global Banking and the International Policy Response," International Finance, Wiley Blackwell, vol. 15(2), pages 155-178, June.
    7. Michael D Bordo & Owen F Humpage & Anna J Schwartz, 2015. "The Evolution of the Federal Reserve Swap Lines since 1962," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(2), pages 353-372, September.
    8. Patrick McGuire & Goetz von Peter, 2009. "The US dollar shortage in global banking," BIS Quarterly Review, Bank for International Settlements, March.
    9. Yongding Yu, 2012. "Revisiting the Internationalization of the Yuan," Macroeconomics Working Papers 23311, East Asian Bureau of Economic Research.
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    Cited by:

    1. repec:bla:worlde:v:41:y:2018:i:10:p:2691-2708 is not listed on IDEAS
    2. repec:bla:devchg:v:50:y:2019:i:1:p:3-23 is not listed on IDEAS

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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