This is the role of central bank swap lines in the global economy .


On 11 September 2001, US money markets unexpectedly closed. Foreign banks with significant dollar investments funded by rolling over financing from US money markets found themselves in a crisis. The Federal Reserve resolved the problem with a novel emergency liquidity facility – the Fed would lend the Bank of Canada, the Bank of England, and the ECB up to $90 billion through a swap line against their local currency, which these central banks would then lend out to banks in their own jurisdictions. One month later, when money markets had reopened, the swap line was closed and a liquidity crisis was averted. On 11 September 2001, US money markets unexpectedly closed. Foreign banks with significant dollar investments funded by rolling over financing from US money markets found themselves in a crisis. The Federal Reserve resolved the problem with a novel emergency liquidity facility – the Fed would lend the Bank of Canada, the Bank of England, and the ECB up to $90 billion through a swap line against...

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