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The Global Network of Liquidity Lines

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  • Bahaj, Saleem
  • Fuchs, Marie
  • Reis, Ricardo

Abstract

At the end of 2023, there were 175 cross-border connections between central banks in a global network of liquidity lines that gave access to foreign currency for countries accounting for 79% of world GDP. This paper presents a comprehensive dataset of this network and its characteristics between 2000 and 2023. While the Federal Reserve drove growth in 2007-09, the network expanded as much between 2010 and 2015 through bilateral arrangements involving the ECB and the People's Bank of China. The network structure means that banks without direct access to a source central bank can still have indirect access to its currency. The central intermediaries in the network for all major currencies are the PBoC and the ECB. We find support using cross-country data that the lines reduce CIP deviations at the tails. Liquidity lines are often signed to substitute for a bleeding of FX reserves, but once in place they complement reserves.

Suggested Citation

  • Bahaj, Saleem & Fuchs, Marie & Reis, Ricardo, 2024. "The Global Network of Liquidity Lines," CEPR Discussion Papers 19070, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19070
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    References listed on IDEAS

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    1. Robert N McCauley & Catherine R Schenk, 2020. "Central bank swaps then and now: swaps and dollar liquidity in the 1960s," BIS Working Papers 851, Bank for International Settlements.
    2. Saleem Bahaj & Ricardo Reis, 2022. "Central Bank Swap Lines: Evidence on the Effects of the Lender of Last Resort," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 1654-1693.
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    4. Michael D Bordo & Owen F Humpage & Anna J Schwartz, 2015. "The Evolution of the Federal Reserve Swap Lines since 1962," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(2), pages 353-372, September.
    5. Kelly, Steven, 2023. "United States: FIMA Repo Facility, 2020," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 5(1), pages 558-579, July.
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    Keywords

    IMF;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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