During the recent global financial crisis, some central banks introduced two innovative cross-border operations to deal with the problems of foreign currency liquidity shortages: domestic liquidity operations using cross-border collaterals and operations for supplying foreign currency based on standing swap lines among central banks. We show theoretically that central banks improve the efficiency of equilibrium under foreign currency liquidity shortages by those two innovative temporary policy measures.
Keywords: Standing swap lines; Operations supplying US dollar funds outside the US; Cross-border collateral arrangements
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.