Central Banks Casting a Global Financial Safety Net: What Drives the Supply of Bilateral Swaps?

Jakree Koosakul and Alexei Miksjuk

No 2024/088, IMF Working Papers from International Monetary Fund

Abstract: The expansion of bilateral swap arrangements (BSAs) since the Global Financial Crisis has led to a substantial reconfiguration of the Global Financial Safety Net (GFSN). This paper examines the drivers of BSA supply using a novel dataset on all publicly documented BSAs. It finds that countries with well-developed financial markets and institutions and high trade openness are more likely to backstop other economies by establishing BSAs. In addition, their choice of BSA counterparts is driven by strong investment and trade exposures to these countries, with variation in the relative importance of these factors across major BSA providers. The paper shows that geopolitical considerations often affect such decisions, as BSAs are less likely to be established between geopolitically distant countries and more likely between countries in the same regional economic bloc.

Keywords: Bilateral swap arrangements; geoeconomic fragmentation; global financial safety net; liquidity provision; BSA supply; BSA source country; GFSN evolution; BSA counterpart; Liquidity; Financial sector development; Financial safety nets; International reserves; Global financial crisis of 2008-2009; Global (search for similar items in EconPapers)
Pages: 32
Date: 2024-04-26
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn and nep-mon
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