Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs

36 Pages Posted: 2 Feb 2010 Last revised: 26 May 2010

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Craig Kennedy

Federal Reserve Banks - Federal Reserve Bank of New York

Jason Miu

Federal Reserve Banks - Federal Reserve Bank of New York

Multiple version iconThere are 3 versions of this paper

Date Written: February 1, 2010

Abstract

Following a scarcity of dollar funding available internationally to banks and financial institutions, in December 2007 the Federal Reserve began to establish or expand Temporary Reciprocal Currency Arrangements with fourteen foreign central banks. These central banks had the capacity to use these swap facilities to provide dollar liquidity to institutions in their jurisdictions. This paper presents the developments in the dollar swap facilities through the end of 2009. The facilities were a response to dollar funding shortages outside the United States during a period of market dysfunction. Formal research, as well as more descriptive accounts, suggests that the dollar swap lines among central banks were effective at reducing the dollar funding pressures abroad and stresses in money markets. The central bank dollar swap facilities are an important part of the toolbox for dealing with systemic liquidity disruptions.

Keywords: banks, foreign exchange, swap, reciprocal currency arrangement, liquidity, dollar

JEL Classification: E44, F36, G32

Suggested Citation

Goldberg, Linda S. and Kennedy, Craig and Miu, Jason, Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs (February 1, 2010). FRB of New York Staff Report No. 429. Available at SSRN: https://ssrn.com/abstract=1546650 or http://dx.doi.org/10.2139/ssrn.1546650

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
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212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Craig Kennedy

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Jason Miu

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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