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ECB Euro Liquidity Lines

Silvia Albrizio, Iván Kataryniuk, Luis Molina Sánchez and Jan Schäfer

No 2023/096, IMF Working Papers from International Monetary Fund

Abstract: Central bank liquidity lines have gained momentum since the global financial crisis as a crosscurrency liquidity management tool. We provide a complete timeline of the ECB liquidity line announcements and study their signalling and spillback effects. The announcement of an ECB euro liquidity line decreases the premium paid by foreign agents to borrow euros in FX markets relative to currencies not covered by these facilities by 51 basis points. Consistent with a stylized model, bank equity prices increase by around 1.75% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.

Keywords: liquidity facilities; central bank swap and repo lines; spillbacks.; ECB liquidity line announcement; ECB Euro liquidity line; cross-currency liquidity management tool; central bank liquidity line; Liquidity; Currencies; Currency markets; Currency swaps; Asset prices; Global (search for similar items in EconPapers)
Pages: 58
Date: 2023-05-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-ifn and nep-mon
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Handle: RePEc:imf:imfwpa:2023/096