EconPapers    
Economics at your fingertips  
 

Central bank swap lines and CIP deviations

Richhild Moessner, William Allen (), Gabriele Galati () and William Nelson

No 482, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: We study the use of US dollar central bank swap lines as a tool for addressing dislocations in the foreign currency swap market against the USD since the global financial crisis. We find that the use of the Federal Reserve’s USD central bank swap lines was mainly related to tensions in US money markets during times of financial crisis, and less to tensions which were confined to foreign exchange swap markets. In particular, we find that the use of USD central bank swap lines did not react significantly to the recent period of persistent deviations of covered interest parity (CIP) since 2014. These results are consistent with the view that the Federal Reserve was guided by enlightened self-interest when providing swap lines to foreign central banks, in order to reduce dislocations in US financial markets and support financial stability. In recent years foreign exchange swap markets have not functioned properly, but it appears that now that the crisis is over, the Federal Reserve and other central banks have decided against trying permanently to fill the gap left by the dysfunction in the commercial foreign exchange swap market.

Keywords: Central bank swap lines; foreign exchange swaps; covered interest parity; financial crisis (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2017-08
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.niesr.ac.uk/sites/default/files/publications/DP482.pdf

Related works:
Journal Article: Central bank swap lines and CIP deviations (2017) Downloads
Working Paper: Central bank swap lines and CIP deviations (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:482

Access Statistics for this paper

More papers in National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research 2 Dean Trench Street Smith Square London SW1P 3HE. Contact information at EDIRC.
Bibliographic data for series maintained by Library & Information Manager ().

 
Page updated 2019-05-08
Handle: RePEc:nsr:niesrd:482