At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, a further network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.
Elasticity and Discipline in the Global Swap Network
Working Paper Series By
This paper sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis.
Working Paper Series ByDownload
- WP27-Mehrling (pdf, 1005.43 KB)
- E5 Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 International Finance
- G1 General Financial Markets
From the Collection