Robert McCauley, Catherine R. Schenk, 12 April 2020

A major source of vulnerability during global financial crises, both in the past and at present, is the severe shortage of US dollar funding around the world. This necessitates extensive central bank cooperation, in the form of central bank swap lines and other innovative solutions, to relieve the strain on dollar liquidity. This column evaluates the close cooperation between the Fed, BIS and other central banks in response to a strained eurodollar market in the 1960s, and compares this to other episodes in the 1990s, 2008 and 2020. The wide system of swaps that existed in the past amounted to a global financial net aimed at managing dollar liquidity and stabilising exchange rates.

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