By Linda Goldberg, Fabiola Ravazzolo
With the onset of the Covid-19 pandemic, the Federal Reserve, along with other central banks, deployed international global liquidity backstops to counter stressed market conditions. This column analyses the effectiveness of central bank swap lines and the Foreign and International Authorities repo facility. It finds that these facilities contributed to the narrowing of foreign exchange swap basis spreads and reduced the sensitivity of global funding strains to changes in risk sentiment. Access to Fed international dollar facilities also contributed to the speed and degree of normalisation of conditions in offshore dollar funding markets.
Link: The Fed’s international dollar liquidity facilities: Roles and effects