The Global Network of Liquidity Lines

Saleem Bahaj, Marie Fuchs and Ricardo Reis

No 19070, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: At the end of 2023, there were 175 cross-border connections between central banks in a global network of liquidity lines that gave access to foreign currency for countries accounting for 79% of world GDP. This paper presents a comprehensive dataset of this network and its characteristics between 2000 and 2023. While the Federal Reserve drove growth in 2007-09, the network expanded as much between 2010 and 2015 through bilateral arrangements involving the ECB and the People's Bank of China. The network structure means that banks without direct access to a source central bank can still have indirect access to its currency. The central intermediaries in the network for all major currencies are the PBoC and the ECB. We find support using cross-country data that the lines reduce CIP deviations at the tails. Liquidity lines are often signed to substitute for a bleeding of FX reserves, but once in place they complement reserves.

Keywords: IMF (search for similar items in EconPapers)
JEL-codes: E44 F33 G15 (search for similar items in EconPapers)
Date: 2024-05
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Working Paper: The Global Network of Liquidity Lines (2024)
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