ECB euro liquidity lines

Silvia Albrizio, Iván Kataryniuk, Luis Molina Sánchez and Jan Schäfer ()
Additional contact information
Jan Schäfer: CEMFI

No 2125, Working Papers from Banco de España

Abstract: The use of central bank liquidity lines has gained momentum since the global financial crisis in order to provide liquidity in foreign exchange markets, while at the same time preventing threats to financial stability and negative spillbacks. US dollar swap lines are well studied, but much less is known about the effects of liquidity lines in euros. We use a difference-in-differences strategy to show that the announcement of ECB euro liquidity lines has a direct positive signalling effect since the premium paid by foreign agents to borrow euros in FX markets decreases up to 76 basis points relative to currencies not covered by these facilities. Additionally, the paper provides suggestive evidence that these facilities generate positive spillbacks to the euro area since domestic bank equity prices increase by 6.7% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.

Keywords: liquidity facilities; central banks swap and repo lines; spillbacks (search for similar items in EconPapers)
JEL-codes: E44 E58 F33 G15 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2021-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-ifn, nep-isf, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 21/Files/dt2125e.pdf First version, August 2021 (application/pdf)

Related works:
Working Paper: ECB Euro Liquidity Lines (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2125

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().