Institutional Designs to Alleviate Liquidity Shortages in a Two- Country Model

Hiroshi Fujiki

No 13-E-07, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Fujiki (2003, 2006) extended the Freeman (1996) model to a two- country model, demonstrating that elastic money supplies in foreign exchange markets and the domestic credit market yield efficiency gains in monetary equilibrium, and that several institutional designs equally achieve the desired elastic money supplies. The present paper considers four institutional designs using a model similar to Fujiki (2003): a combination of central bank discount window policy and the CLS Bank; a central bank intervention both in the domestic credit market and the foreign exchange market; cross-border collateral arrangements; and foreign currency liquidity swap lines. These institutional designs yield the same efficiency gains in our model.

Keywords: Foreign exchange market; CLS; Cross-border collateral arrangements; Liquidity swap lines (search for similar items in EconPapers)
JEL-codes: E58 F31 F33 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-mac and nep-mon
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Related works:
Journal Article: Institutional designs to alleviate liquidity shortages in a two-country model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:13-e-07

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