The Use Of Foreign Exchange Swaps By Central Banks

Author : Ms.Catharina J. Hooyman
Publisher : International Monetary Fund
Page : 30 pages
File Size : 53,8 Mb
Release : 1993-08-01
Category : Business & Economics
ISBN : 9781451848489

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The Use of Foreign Exchange Swaps by Central Banks by Ms.Catharina J. Hooyman Pdf

The paper discussed the use of foreign exchange swaps by central banks. Such use has aimed at affecting domestic liquidity, managing foreign exchange reserves, and stimulating domestic financial markets. It discusses these different uses and present evidence for a selected group of countries. The paper cautions about the use of foreign exchange swaps to defend a particular exchange rate at a time when foreign exchange reserves are under pressure. It notes, finally, that use of foreign exchange swaps by central banks has been losing importance.

Author : Catharina Hooyman
Publisher : Unknown
Page : 30 pages
File Size : 53,9 Mb
Release : 2006
Category : Electronic
ISBN : OCLC:1291213213

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The Use of Foreign Exchange Swaps by Central Banks by Catharina Hooyman Pdf

The paper discussed the use of foreign exchange swaps by central banks. Such use has aimed at affecting domestic liquidity, managing foreign exchange reserves, and stimulating domestic financial markets. It discusses these different uses and present evidence for a selected group of countries. The paper cautions about the use of foreign exchange swaps to defend a particular exchange rate at a time when foreign exchange reserves are under pressure. It notes, finally, that use of foreign exchange swaps by central banks has been losing importance.

Author : Ms.Li L. Ong,Ms.Bergljot Barkbu
Publisher : International Monetary Fund
Page : 47 pages
File Size : 55,9 Mb
Release : 2010-03-01
Category : Business & Economics
ISBN : 9781451963533

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FX Swaps by Ms.Li L. Ong,Ms.Bergljot Barkbu Pdf

The proliferation of foreign exchange (FX) swaps as a source of funding and as a hedging tool has focused attention on the role of the FX swap market in the recent crisis. The turbulence in international money markets spilled over into the FX swap market in the second-half of 2007 and into 2008, giving rise to concerns over the ability of banks to roll over their funding requirements and manage their liquidity risk. The turmoil also raised questions about banks' ability to continue their supply of credit to the local economy, as well as the external financing gap it could create. In this paper, we examine the channels through which FX swap transactions could affect a country's financial and economic stability, and highlight the strategies central banks can employ to mitigate market pressures. While not offering any judgment on the instrument itself, we show that the use of FX swaps for funding and hedging purposes is not infallible, especially during periods of market stress.

Author : Linda S. Goldberg
Publisher : DIANE Publishing
Page : 36 pages
File Size : 41,7 Mb
Release : 2010-08
Category : Business & Economics
ISBN : 9781437930931

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Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs by Linda S. Goldberg Pdf

Following a scarcity of dollar funding available internationally to banks and financial institutions, in Dec. 2007 the Federal Reserve began to establish or expand Temporary Reciprocal Currency Arrangements with 14 foreign central banks. These central banks had the capacity to use these swap facilities to provide dollar liquidity to institutions in their jurisdictions. This paper presents the developments in the dollar swap facilities through the end of 2009. The facilities were a response to dollar funding shortages outside the U.S. during a period of market dysfunction. The dollar swap lines among central banks were effective at reducing the dollar funding pressures abroad and stresses in money markets. Charts and tables.

Author : Romain Lafarguette,Mr.Romain M Veyrune
Publisher : International Monetary Fund
Page : 33 pages
File Size : 51,6 Mb
Release : 2021-02-12
Category : Business & Economics
ISBN : 9781513569406

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Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework by Romain Lafarguette,Mr.Romain M Veyrune Pdf

This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.

Author : Linda S. Goldberg,Craig Kennedy,Jason Miu
Publisher : Unknown
Page : 34 pages
File Size : 50,6 Mb
Release : 2010
Category : Currency swaps
ISBN : OCLC:1025592164

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Central bank dollar swap lines and overseas dollar funding costs by Linda S. Goldberg,Craig Kennedy,Jason Miu Pdf

Following a scarcity of dollar funding available internationally to banks and financial institutions, starting in December 2007 the Federal Reserve established or expanded Temporary Reciprocal Currency Arrangements with fourteen foreign central banks. These central banks had the capacity to use these swap facilities to provide dollar liquidity to institutions in their jurisdictions. This paper presents the developments in the dollar swap facilities through the end of 2009. The facilities were a response to dollar funding shortages outside the United States during a period of market dysfunction. Formal research, as well as more descriptive accounts, suggests that the dollar swap lines among central banks were effective at reducing the dollar funding pressures abroad and stresses in money markets. The central bank dollar swap facilities are an important part of a toolbox for dealing with systemic liquidity disruptions -- National Bureau of Economic Research web site.

Author : Mr.Peter Breuer
Publisher : International Monetary Fund
Page : 41 pages
File Size : 54,7 Mb
Release : 1999-10-01
Category : Business & Economics
ISBN : 9781451856101

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Central Bank Participation in Currency Options Markets by Mr.Peter Breuer Pdf

This paper analyzes whether and how central banks can use currency options to lower exchange rate volatility and maintain (implicit) target zones in foreign exchange markets. It argues that selling rather than buying options will result in market makers dynamically hedging their long option exposure in a stabilizing manner, consistent with the first objective. Selling a “strangle” allows a central bank to increase the credibility of its commitment to a target zone, and could have a lower expected cost than spot market interventions. However, this strategy also exposes the central bank to an unlimited loss potential.

Author : Mr.Damiano Sandri
Publisher : International Monetary Fund
Page : 24 pages
File Size : 48,9 Mb
Release : 2020-06-12
Category : Business & Economics
ISBN : 9781513547664

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FX Intervention to Stabilize or Manipulate the Exchange Rate? Inference from Profitability by Mr.Damiano Sandri Pdf

We analyze the profitability of FX swaps used by the central bank of Brazil to shed light on the rationale for FX intervention. We find that swaps are profitable in expectation, suggesting that FX intervention is used to stabilize the exchange rate in the face of temporary excessive movements rather than to manipulate it away from fundamental values. In line with this interpretation, we find that the scale of FX intervention responds to the degree of exchange rate misalignment relative to UIP conditions. We also document that intervention is more aggressive when there is less uncertainty about the medium-term level of the exchange rate and when the exchange rate is overvalued rather than undervalued.

Author : Mr.Matthew S Malloy
Publisher : International Monetary Fund
Page : 28 pages
File Size : 53,9 Mb
Release : 2013-03-15
Category : Business & Economics
ISBN : 9781475557312

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Factors Influencing Emerging Market Central Banks’ Decision to Intervene in Foreign Exchange Markets by Mr.Matthew S Malloy Pdf

Using panel data for 15 economies from 2001-12, I identify determinants of central bank foreign exchange intervention in emerging markets (“EMs”) with flexible to moderately managed exchange rates. Similar to other studies, I find that central banks tend to “lean against the wind,” buying/selling more foreign exchange in response to greater short-run and medium-run appreciation/depreciation pressures. The panel structure provides a framework to test whether other macroeconomic variables influence the different rates of reserve accumulation between economies. In testing other variables, I find evidence of both precautionary and external competitiveness motives for reserve accumulation.

Author : United States. Congress. Joint Economic Committee. Subcommittee on International Exchange and Payments
Publisher : Unknown
Page : 216 pages
File Size : 44,5 Mb
Release : 1972
Category : Foreign exchange
ISBN : LOC:00170579446

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Gold and the Central Bank Swap Network by United States. Congress. Joint Economic Committee. Subcommittee on International Exchange and Payments Pdf

Author : Mr.Mark Zelmer
Publisher : International Monetary Fund
Page : 25 pages
File Size : 50,7 Mb
Release : 2001-12-01
Category : Business & Economics
ISBN : 9781451971583

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Monetary Operations and Central Bank Balance Sheets in a World of Limited Government Securities by Mr.Mark Zelmer Pdf

The limited supply of government securities in some industrial countries has important ramifications for the operating techniques used by central banks to implement monetary policy, provide credit to the financial sector, and also for the assets they hold on their balance sheets. The paper reviews the salient facts regarding industrial central bank balance sheets and operating techniques, and outlines different options for dealing with a limited supply of government securities. The main conclusion is that central banks may wish to consider extending credit using a broad range of assets as collateral, and engage in outright transactions of securities guaranteed by financial institutions.

Author : Mario I. Bléjer,Liliana Schumacher
Publisher : International Monetary Fund
Page : 24 pages
File Size : 55,7 Mb
Release : 2000-03
Category : Business & Economics
ISBN : UCSD:31822028586352

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Central Banks Use of Derivatives and Other Contingent Liabilities by Mario I. Bléjer,Liliana Schumacher Pdf

Whereas some central bank derivatives and other contingent liabilities arise from anomalous circumstances, there are a number of positive reasons that explain their popularity. After analyzing the rationale for these operations, we stress that most of these operations, being off-balance sheet, increase the risk and reduce the transparency of central bank accounts. This in turn makes more difficult the assessment of the financial position of the monetary authority and, by implication, of the macroeconomic conditions of the country. To deal with this issue, we suggest a comprehensive portfolio approach that values, in an economic sense, all assets and liabilities of the central bank.

Author : Mr.Yan Carriere-Swallow,Luis I. Jacome H.,Mr.Nicolas E Magud,Alejandro M. Werner
Publisher : International Monetary Fund
Page : 128 pages
File Size : 48,8 Mb
Release : 2016-09-30
Category : Business & Economics
ISBN : 9781475543360

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Central Banking in Latin America by Mr.Yan Carriere-Swallow,Luis I. Jacome H.,Mr.Nicolas E Magud,Alejandro M. Werner Pdf

Latin America’s central banks have made substantial progress towards delivering an environment of price stability that is supportive of sustainable economic growth. We review these achievements, and discuss remaining challenges facing central banking in the region. Where inflation remains high and volatile, achieving durable price stability will require making central banks more independent. Where inflation targeting regimes are well-established, remaining challenges surround assessments of economic slack, the communication of monetary policy, and clarifying the role of the exchange rate. Finally, macroprudential policies must be coordinated with existing objectives, and care taken to preserve the primacy of price stability.

Author : Julian Walmsley
Publisher : Unknown
Page : 532 pages
File Size : 40,5 Mb
Release : 1992-04-24
Category : Business & Economics
ISBN : UOM:49015001383364

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The Foreign Exchange and Money Markets Guide by Julian Walmsley Pdf

Provides brief background framework introducing the basic nature of money and foreign exchange markets, the Euromarkets, the international fraomework in which the markets operate. Guides to the prediction of rate movements. Explains basic money market calculations. Contains detailed calculations used in the foreign exchange markets. Discusses derivatives: financial futures, interest rate and currency swaps, and options. Considers questions of risk and exposure.

Author : Hali J. Edison
Publisher : Unknown
Page : 76 pages
File Size : 42,6 Mb
Release : 1993
Category : Business & Economics
ISBN : 0881653071

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The Effectiveness of Central-bank Intervention by Hali J. Edison Pdf