International spillover of central bank swap lines - Evidence from the COVID-19 experience of Korea

Dollar funding cost rose significantly worldwide during the early stage of the COVID-19 pandemic. Against the dollar shortage, the Fed provided liquidity to 14 other central banks through central bank swap lines. I find significant liquidity spillover into Korea by comparing foreign banks from the swap network countries with banks from the other regions in their borrowing from parent banks. The spillover amounts to 11 billion dollars, half of the maximum amount Korea has drawn from the swap line. The result highlights the broad effects of the swap lines via cross-border spillover and foreign banks’ pivotal role in international shock transmission.