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Federal Reserve: The Fed's Dollar Liquidity Swap Lines

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Abstract

The World Health Organization declared COVID-19 a pandemic on March 11, 2020, and fear and uncertainty permeated daily life. The global economy was not immune from the panic. Dollars were quickly becoming scarce: Global trading of the currency ground to a halt, and since dollars were about the safest asset available, those who had them were not about to part with them. On top of that, a spike in demand by those seeking the safety of dollars led to a rapid increase in price. But the dollar was the world's dominant currency and medium of exchange. Without it, banks around the world wouldn't be able to lend, and buyers and sellers of goods and services wouldn't be able to conduct transactions, crippling the economy even further.

Suggested Citation

  • Matthew Wells, 2024. "Federal Reserve: The Fed's Dollar Liquidity Swap Lines," Econ Focus, Federal Reserve Bank of Richmond, vol. 24(4Q), pages 14-17, December.
    • Handle: RePEc:fip:fedrrf:99254
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