The spillover of money market turbulence to FX swap and cross-currency swap markets

Naohiko Baba, Frank Packer and Teppei Nagano

BIS Quarterly Review, 2008

Abstract: We analyse the spillover of the turmoil in money markets in the second half of 2007 to FX swap and long-term cross-currency basis swap markets. We find that the use of swap markets to overcome US dollar funding shortages by non-US financial institutions resulted in marked deviations from covered interest parity conditions and the impairment of liquidity in these markets.

JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
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