Working Paper: NBER ID: w20755
Authors: Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz
Abstract: In this paper, we describe the evolution of the Federal Reserve’s swap lines from their inception in 1962 as a mechanism to forestall claims on U.S gold reserves under Bretton Woods to a means of extending emergency dollar liquidity during the Great Recession. We describe a number of consequences associated with swap operations. We argue, for example, that swaps calm crisis situations by both supplementing foreign countries’ dollar reserves and by signaling central-bank cooperation. We show how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process.
Keywords: Federal Reserve; swap lines; financial crises; international liquidity
JEL Codes: F3; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| establishment of swap lines in 1962 (F33) | stabilization of the dollar's value during that period (F31) |
| swap lines (F33) | calm financial crises (G01) |
| swap operations (C69) | international liquidity (F33) |
| use of swap lines during the Great Recession (F33) | Federal Reserve's policy independence (E58) |
| swap lines (F33) | Federal Reserve's operational strategy (E52) |