Elasticity and Discipline in the Global Swap Network

26 Pages Posted: 19 Nov 2015

See all articles by Perry Mehrling

Perry Mehrling

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: November 12, 2015

Abstract

This paper sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis. At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, a further network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.

JEL Classification: JEL Codes: E58, F33, G15

Suggested Citation

Mehrling, Perry, Elasticity and Discipline in the Global Swap Network (November 12, 2015). Institute for New Economic Thinking Working Paper Series No. 27. Available at SSRN: https://ssrn.com/abstract=2692622 or http://dx.doi.org/10.2139/ssrn.2692622

Perry Mehrling (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

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