Arbeitspapier
Selective swap arrangements and the global financial crisis: Analysis and interpretation
The onset of the US credit crisis in 2008, and its rapid globalization induced the FED to extend unprecedented swap-lines of 30 billion dollars to four emerging markets, and the proliferation of other cross-countries selective swap arrangements. This paper explores the logic for these arrangements, focusing on the degree to which financial and trade linkages, financial openness and credit risk history account for discerning the formation of swap arrangements to EMs. We also study the impact of the formation of these credit lines on the exchange rate and the financial spreads of the relevant countries. We find that exposure of US banks to EMs is the most important selection criterion for explaining the selected four swap-lines. This result is consistent with the outlined model, where we show that in circumstances of unanticipated deleveraging, emergency swap-lines may prevent or mitigate costly liquidation today, allowing investment projects to reach maturity and providing positive option value to both the source and the recipient countries. The FED swap-lines had relatively large short-run impact on the exchange rates of the selected EMs, but much smaller effect on the spreads (measured relative to that of other EMs that were not the recipients of swap-lines). Specifically, non-swap countries saw an average depreciation of 0.15% on the day after swap announcement, but swap countries saw their exchange rate appreciate on average, by about 4%. Yet, all the swap countries saw their exchange rate subsequently depreciate to a level lower than pre-swap rate, calling into question the long-run impact of the arrangements.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 09-02
- Klassifikation
-
Wirtschaft
Economic Integration
International Investment; Long-term Capital Movements
Current Account Adjustment; Short-term Capital Movements
Financial Aspects of Economic Integration
International Financial Markets
- Thema
-
swap-lines
deleveraging
trade and financial exposure
Internationaler Finanzmarkt
Finanzmarktkrise
Zentralbank
Schuldenswap
USA
Aufstrebende Märkte
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Aizenman, Joshua
Pasricha, Gurnain Kaur
- Ereignis
-
Veröffentlichung
- (wer)
-
University of California, Santa Cruz Institute for International Economics (SCIIE)
- (wo)
-
Santa Cruz, CA
- (wann)
-
2009
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Aizenman, Joshua
- Pasricha, Gurnain Kaur
- University of California, Santa Cruz Institute for International Economics (SCIIE)
Entstanden
- 2009
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