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Document Type

Survey

Abstract

Central bank swap arrangements gained new importance during the Global Financial Crisis of 2007–09 (GFC) when wholesale funding markets contracted, causing severe liquidity strains. Led by the Federal Reserve, central banks, in their roles as lenders of last resort, redeployed this tool to provide liquidity in their currencies across borders to great effect. Since the GFC, swap arrangements have become key central bank policy tools and have been repeatedly used to address liquidity constraints. In this paper, we survey 67 swap and swap-like repurchase arrangements and frameworks from the 20th and 21st centuries. In addition, we analyze key design decisions of interest to policymakers seeking to design a central bank swap arrangement. We also review structural developments regarding this policy tool, such as the increasing use of repurchase (repo) arrangements in addition to swaps and multilateral regional swap facilities. We conclude that swap arrangements and related repo arrangements have proved an efficient response to liquidity strains, have become a standing tool to enhance the global financial stability safety net, and are likely to see continued use.

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