Central bank dollar swap lines and overseas dollar funding costs

Linda Goldberg, Craig Kennedy and Jason Miu

No 429, Staff Reports from Federal Reserve Bank of New York

Abstract: Following a scarcity of dollar funding available internationally to financial institutions, in December 2007 the Federal Reserve began to establish or expand Temporary Reciprocal Currency Arrangements with fourteen other central banks. These central banks had the capacity to use the swap facilities to provide dollar liquidity to institutions in their jurisdictions. This paper presents the developments in the dollar swap facilities through the end of 2009. The facilities were a response to dollar funding shortages outside the United States and were effective at making dollars more broadly available to financial institutions overseas during a period of market dysfunction. Formal research, as well as more descriptive accounts, suggests that the dollar swap lines among central banks were effective at reducing the dollar funding pressures abroad and the stresses in money markets. While these findings are compelling, it is still difficult to draw definitive lessons on particular facilities given the numerous changes over time in market conditions and policy responses.

Keywords: Banks and banking, Central; Swaps (Finance); Foreign exchange; Dollar, American; Liquidity (Economics); Currency convertibility; Federal Reserve System (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-ifn and nep-mon
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Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Central bank dollar swap lines and overseas dollar funding costs (2011)
Working Paper: Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs (2010)
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