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Governing global liquidity : Federal Reserve swap lines and the international dimension of US monetary policy

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Pape, Fabian (2022) Governing global liquidity : Federal Reserve swap lines and the international dimension of US monetary policy. New Political Economy, 27 (3). 455-472 . doi:10.1080/13563467.2021.1967912 ISSN 1356-3467.

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Official URL: https://doi.org/10.1080/13563467.2021.1967912

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Abstract

Since the use of swap lines during the global financial crisis, the Federal Reserve is widely seen as international lender of last resort. Yet the focus on emergency liquidity assistance tends to obscure the broader significance of swap lines for US monetary governance. As this article shows, swap lines have historically played a crucial and evolving role in structuring and facilitating specific practices of offshore Eurodollar liquidity production in the interest of US monetary policy. A key contemporary example can be found in the uptake of swap lines during the Covid-19 market turmoil in early 2020: swap lines alleviated offshore dollar funding conditions to such an extent that they also triggered reverse inflows of dollar liquidity back into the US. More than simply providing a backstop to the global system, these swap interventions effectively restructured cross-border financial flows in a way that afforded the Fed greater control over domestic markets. Yet as the capacity to influence global liquidity conditions appears increasingly crucial to the Federal Reserve’s control over domestic monetary conditions, these interventions pose broader questions about its role in managing instable and evolving cross-border credit relations that link domestic and global markets.

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Politics and International Studies
Journal or Publication Title: New Political Economy
Publisher: Routledge
ISSN: 1356-3467
Official Date: 2022
Dates:
DateEvent
2022Published
17 August 2021Available
23 July 2021Accepted
Volume: 27
Number: 3
Page Range: 455-472
DOI: 10.1080/13563467.2021.1967912
Status: Peer Reviewed
Publication Status: Published
Reuse Statement (publisher, data, author rights): “This is an Accepted Manuscript of an article published by Taylor & Francis in New Political Economy on 17/08/2021, available online: http://www.tandfonline.com/10.1080/13563467.2021.1967912
Access rights to Published version: Restricted or Subscription Access
Date of first compliant deposit: 13 August 2021
Funder: This research was supported by the UK Economic and Social Research Council (grant number 1912377).
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