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The High-Frequency Effects of Dollar Swap Lines

Author

Listed:
  • Rohan Kekre
  • Moritz Lenel

Abstract

We study the effects of dollar swap lines using high-frequency responses in asset prices around policy announcements. News about expanded dollar swap lines causes a reduction in liquidity premia, compression of deviations from covered interest parity, and depreciation of the dollar. Equity prices rise and the VIX falls, while the response of long-term government bond prices is mixed. The cross section of high-frequency responses implies that swap lines affect the dollar factor or the price of risk. Our findings are qualitatively consistent with models relating the supply of dollar liquidity to the broader economy.

Suggested Citation

  • Rohan Kekre & Moritz Lenel, 2025. "The High-Frequency Effects of Dollar Swap Lines," American Economic Review: Insights, American Economic Association, vol. 7(1), pages 107-123, March.
    • Handle: RePEc:aea:aerins:v:7:y:2025:i:1:p:107-23
    DOI: 10.1257/aeri.20230667
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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