Bulletin n. 2/2010 | ||
October 2010 | ||
Joshua Aizenman, Gurnain Kaur Pasricha |
||
Selective swap arrangements and the global financial crisis: Analysis and interpretation | ||
in International Review of Economics and Finance , Volume 19, Issue 3 , 2010 , 353-365 | ||
This paper explores the logic inducing the FED to extend unprecedented swap-lines to four emerging markets in September 2008. Exposure of US banks to EMs turned out to be the most important selection criterion for explaining the “selected four” swap-lines. This result is consistent with the outlined model. The FED swap-lines had relatively large short-run impact on the exchange rates of the selected EMs, but much smaller effect on the spreads. Yet, all the swap countries saw their exchange rate subsequently depreciate to a level lower than pre-swap rate, calling into question the long-run impact of the swap arrangements. | ||