The Federal Reserve’s Dollar Swap Lines and the European Central Bank during the global financial crisis of 2007–09

Emmanuel Carré and Laurent Le Maux

Cambridge Journal of Economics, 2020, vol. 44, issue 4, 723-747

Abstract: Although the literature has studied the role of the Federal Reserve as the global lender of last resort in 2007–09, many aspects of the Dollar Swap Lines to the European Central Bank need further exploration. Accordingly, we provide original evidence about the auction operations, allotted amounts and interest rates with regard to the Federal Reserve’s dollar swaps and the European Central Bank’s dollar provision. More specifically, we examine the demand side of the Dollar Swap Lines (whereas the existing literature mentions the supply side only) and we scrutinise the interest rate (whereas the literature concentrates on volumes) set by the Federal Reserve, and also the rate set by the European Central Bank. Our findings cast light on the nature of the relationship between the Federal Reserve and the European Central Bank. Finally, we contribute to the literature on the global lender of last resort by coining the notion of the financial dilemma, under the dollar system within a framework of globalised financial markets.

Keywords: Financial globalisation; International lender of last resort; Federal Reserve; European Central Bank; Central bank swap arrangements (search for similar items in EconPapers)
Date: 2020
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