Money markets

This paper studies the impact effect of monetary policy shocks on the exchange rate in Australia, Canada, and New Zealand during the 1990s. Shocks are identified by the reaction of three month market interest rates to policy announcements that were not themselves endogenous to economic news on the same day. The main result is that a 100 basis point contractionary shock will appreciate the exchange rate by 2-3 percent on impact. The association of interest rate hikes with depreciations that is sometimes observed during periods of exchange market pressure is mainly attributable to reverse causality.

In distinguishing between formal and real subsumption of the labor and production process of society by capital Marx provides a formative periodizing of capitalism. Yet, losing sight of Marx’s subtle distinctions, it would be the writings of Karl Kautsky, in whose hands the very term Marxism originates, that most influenced generations of Marx’s followers. Kautsky maintained that Marxism is a theory of historical directionality. He argued that Marx’s study of capitalism constituted a subtheory of historical materialism and confirmed socialism as the historical telos. A combination of theoretical problems deriving from Kautsky’s reconstruction of Marxism plus the fact that capitalism would survive its first major economic crisis at the close of the nineteenth century to emerge reloaded in its imperialist stage by the early twentieth century animated the important work of Rudolf Hilferding, V.I. Lenin, and Nicolai Bukharin. Theorizing of imperialism provides the foundation for studies of the corporate form of business enterprise and what is referred to today as financialization.

A new data set of on openness indicators and trade liberalization dates allows the 1995 Sachs and Warner study on the relationship between trade openness and economic growth to be extended to the 1990s. New evidence on the time paths of economic growth, physical capital investment, and openness around episodes of trade policy liberalization is also presented. Analysis based on the new data set suggests that over the 1950-98 period, countries that liberalized their trade regimes experienced average annual growth rates that were about 1.5 percentage points higher than before liberalization. Postliberalization investment rates rose 1.5-2.0 percentage points, confirming past findings that liberalization fosters growth in part through its effect on physical capital accumulation. Liberalization raised the average trade to GDP ratio by roughly 5 percentage points, suggesting that trade policy liberalization did indeed raise the actual level of openness of liberalizers. However, these average effects mask large differences across countries. JEL codes: F1, F4, O4

When the first phase of the crisis focused primarily on the interbank market volatility, the second phase spread on the instability of public finance. Although the overall stance of public finances of the new members is better than the old member countries, the differences within the new group are significant (from the performer Estonia to the laggard Hungary). Sovereign CDS spreads have become major variables focused on risks and expectations about the fiscal situation of different countries. In the paper we investigate, first, whether there is a link in the new member states (NMS) between the expectations about the condition of their public finances and the dynamics of money markets, including integration of national money markets with the euro area. In others word we contribute to clarify the relationship between fiscal and liquidity risks as major components of systemic risk. Second, we look on the particularities of this relationship through the different phases of the crisis and across the different countries using different monetary regimes. This concerns mostly two opposite extreme monetary regimes, namely, currency boards (and quasi-fixed exchange rate) -Bulgaria, Estonia, Latvia, Lithuania, or inflation targeting -Poland, Czech Republic, Hungary and Romania. The results obtained form the high frequency panel data models support the theoretical hypotheses and policy intuition that exists strong relationship between the liquidity risk (measured by the short term money markets) and fiscal risk (measured by CDS) and that this link is extremely unstable and in some sense nonlinear during the financial crisis. Our study confirm that the strong link between monetary and public finance risk as apart of total systemic risk increase during the crisis especially for currency boards regimes, when the link becomes stronger and pronounced. For the inflation targeting countries the link became weaker and less pronounced. JEL code: E43; G10; P20; F31; F34

This paper uses a two-sector model to estimate the relationship between prices, money, and the exchange rate in Madagascar during the period 1982-2004. The estimated model, using quarterly data, finds a stable long-run relationship among monetary aggregates, domestic prices, real income, and foreign interest rates. In addition, the error-correction model shows that changes in the monetary aggregates, the exchange rate, and foreign interest rates exert a significant impact on inflation. The results also suggest that a disequilibrium in the money market has a lasting impact on inflation. The paper concludes with policy recommendations.

We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.

We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.

The paper makes an assessment of the progress made in developing local debt markets in emerging Asia. Market development has been limited by hurdles confronting borrowers and lenders, current and potential liquidity providers, and insufficient support from government policies and regulations. Besides fostering a credit culture to deepen local debt markets, the issue of critical size can be addressed through an integrated regional market for local currency bonds that provides greater scale, efficiency, and access. With rapid economic growth in Asia, a key challenge is to generate financial assets that can provide the underlying collateral for expanding fixed-income markets, and hence domestic and regional investment opportunities. JEL Classification Numbers: E44; F36; G18; H63; O16.

Purpose-In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments. Design/methodology/approach-First, the paper explores the short and long-run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI). Findings-The findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful. Originality/value-The paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper is the first attempt to look at inflation dynamics and monetary transmission mechanisms in Armenia in the context of a full information model containing three interrelated markets: foreign exchange, money, and labor. Using the vector error correction model (VECM) approach, we find that the exchange rate pass-through to prices is very strong relative to credit, wage, and interest rate channels. The analysis suggests a relatively fast adjustment of prices to long-run disequilibria in the exchange rate market, albeit with initial overshooting of the price level. In addition, we find no evidence of prices responding to changes in money and wages in a statistically significant manner.

The paper makes an assessment of the progress made in developing local debt markets in emerging Asia. Market development has been limited by hurdles confronting borrowers and lenders, current and potential liquidity providers, and insufficient support from government policies and regulations. Besides fostering a credit culture to deepen local debt markets, the issue of critical size can be addressed through an integrated regional market for local currency bonds that provides greater scale, efficiency, and access. With rapid economic growth in Asia, a key challenge is to generate financial assets that can provide the underlying collateral for expanding fixed-income markets, and hence domestic and regional investment opportunities. JEL Classification Numbers: E44; F36; G18; H63; O16.

British banking had been enormously stable from the third quarter of the nineteenth century until the 1970s. The stability is frequently explained casually as a consequence of the cartel. But there was no cartel before 1914, and even through the twentieth century, the rate of return on capital in banking was not out of line with that in the rest of the economy, a feature more in keeping with a competitive model than a monopolistic one. Of course, there are many possible explanations for that and many ingredients in the stability. Importantly, the banks had found their own way to the appropriate capital, cash, and liquidity ratios. After the Second World War, the latter two were to change under direction from the authorities. And while it was not spelled out in these terms at the time, the Bank took responsibility for financial stability. The fact that the banking system had been so stable for so long meant that the subject was little discussed. The fact was, though, that the Bank watched over all that went on in the City and gathered intelligence on everything from mood to individual behaviour. The key figure in this in the Bank was the Principal of the Discount Office. That job was becoming more difficult in the world after competition and credit control (CCC) and came under close scrutiny in the secondary banking crisis that broke at the end of 1973, one of the most dramatic events in an eventful decade in which the Bank was involved.

In autumn of 2007 Britain experienced its first bank run of any significance since the reign of Queen Victoria. The run was on a bank called Northern Rock. This was extraordinary, for Britain had been free of such episodes because by early in the third quarter of the 19th century the Bank of England had developed techniques to prevent them.

Purpose-In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments. Design/methodology/approach-First, the paper explores the short and long-run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI). Findings-The findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful. Originality/value-The paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

When the first phase of the crisis focused primarily on the interbank market volatility, the second phase spread on the instability of public finance. Although the overall stance of public finances of the new members is better than the old member countries, the differences within the new group are significant (from the performer Estonia to the laggard Hungary). Sovereign CDS spreads have become major variables focused on risks and expectations about the fiscal situation of different countries. In the paper we investigate, first, whether there is a link in the new member states (NMS) between the expectations about the condition of their public finances and the dynamics of money markets, including integration of national money markets with the euro area. In others word we contribute to clarify the relationship between fiscal and liquidity risks as major components of systemic risk. Second, we look on the particularities of this relationship through the different phases of the crisis and across the different countries using different monetary regimes. This concerns mostly two opposite extreme monetary regimes, namely, currency boards (and quasi-fixed exchange rate)-Bulgaria, Estonia, Latvia, Lithuania, or inflation targeting-Poland, Czech Republic, Hungary and Romania. The results obtained form the high frequency panel data models support the theoretical hypotheses and policy intuition that exists strong relationship between the liquidity risk (measured by the short term money markets) and fiscal risk (measured by CDS) and that this link is extremely unstable and in some sense nonlinear during the financial crisis. Our study confirm that the strong link between monetary and public finance risk as apart of total systemic risk increase during the crisis especially for currency boards regimes, when the link becomes stronger and pronounced. For the inflation targeting countries the link became weaker and less pronounced.

Sovereign CDS spreads have become major variables focused on risks and expectations about the fiscal situation of different countries. In the paper we investigate, first, whether there is a link in the new member states between the expectations about the condition of their public finances and the dynamics of money markets, including integration of national money markets with the Euro area. Second, we look on the particularities of this relationship through the different phases of the crisis and across the different countries using different monetary regimes. This concerns mostly two opposite extreme monetary regimes, namely, currency boards (and quasi-fixed exchange rate) - Bulgaria, Estonia, Latvia, Lithuania, or inflation targeting - Poland, Czech Republic, Hungary and Romania. The results obtained form the high frequency panel data models support the theoretical hypotheses and policy intuition that exists strong relationship between the liquidity risk (measured by the short term ...

This paper describes the demand and supply factors affecting the amounts of deposits held by banks with the Eurosystem in the first 18 months of Stage Three of EMU and differences to the years before. The paper starts from the methodology adopted in a recent study by James Hamilton on "The supply and demand for Federal Reserve deposits". While the treatment of the autonomous liquidity factors is in principle similar, the modelling of open market operations and of the recourse to standing facilities diverge. These differences stem from different institutional settings, but also from somewhat different views on the accurate model. In a second part, the paper turns to prices by providing a simple econometric model capturing a large part of the variability of the difference between the EONIA rate (the price for daily funds) and the rate charged for the main refinancing operations.

We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.

In autumn of 2007 Britain experienced its first bank run of any significance since the reign of Queen Victoria. The run was on a bank called Northern Rock. This was extraordinary, for Britain had been free of such episodes because by early in the third quarter of the 19th century the Bank of England had developed techniques to prevent them. A second extraordinary aspect of the affair was that it was the decision to provide support for the troubled institution that triggered the run. And thirdly, unlike most runs in banking history, it was a run only on that one institution. This paper considers why the traditional techniques for the maintenance of banking stability failed -if they did fail -and then considers how these techniques may need to be changed or supplemented to prevent such problems in the future. The paper starts with a narrative of the events, then turns to banking policy before the event and to the policy responses after it. We suggest both why the decision to provide support triggered the run and why the run was confined to a single institution. That prepares the way for our consideration of what should be done to help prevent the recurrence of such episodes in the future.

The Asian financial crisis marked the beginning of intensive efforts to improve the quality of financial supervision. The Basel Core Principles provided a guiding framework for supervision, work progressed on supervisory governance and supervisory architectures were revisited in support of more effective and efficient supervision. The financial and economic crisis that started in 2007-08 was a crude awakening: in many countries these improvements seemed not to be able to avoid or mitigate the crisis This paper brings the first systematic analysis of the impact of two key features of the supervisory architecture-consolidation and quality of governance -and comes to the conclusion that both were negatively correlated with economic resilience.. Also the central bank involvement in supervision did not seem to matter. After having pointed out the limitations of the governance arrangements and using the new distinction between macro and micro prudential surveillance, we suggest that supervision be assigned to two separate institutions (macro vs micro) so that checks and balances, as a complement to governance, rather than consolidation, can assist in reducing the possibility of failure.

В статье исследована структура мирового и украинского финансовых рынков. Рынок деривативов рассмотрен как отдельный сегмент, но в составе рынков, которые образуют полную структуру финансового рынка.
Ключевые слова: финансовый рынок, рынок деривативов, фондовый рынок, денежный рынок, товарный рынок, валютный рынок

Ссылка на украинскую версию (Оригинал): http://www.academia.edu/4455050/_

In Scotland, at the time when Adam Smith was writing The Wealth of Nations, a monetary system was taking root in which, besides metallic money, convertible notes issued by private banks also circulated. In the same period, the English colonies of

This paper investigates whether the degree and nature of interdependence between the United States and the euro area have changed with the advent of EMU. Using real-time data, it addresses this issue from the perspective of financial markets by analysing the effects of monetary policy announcements and macroeconomic news on daily interest rates in the United States and the euro area. The paper finds that the interdependence of money markets has steadily increased over time, with the spillover effects from the United States to the euro area being somewhat stronger than in the opposite direction. Moreover, for the early stages of EMU, we find evidence that the markets were going through a learning process about the ECB monetary policy. Towards the end of our sample period, the importance attached to euro area consumer prices and M3 has reached levels that are remarkably similar to the role of German consumer prices and M3 for German interest rates prior to EMU. JEL Classification: E43...

This paper investigates whether the degree and the nature of economic and monetary policy interdependence between the United States and the euro area have changed with the advent of EMU. Using real-time data, it addresses this issue from the perspective of financial markets by analysing the effects of monetary policy announcements and macroeconomic news on daily interest rates in the United States and the euro area. First, the paper finds that the interdependence of money markets has increased strongly around EMU. Although spillover effects from the United States to the euro area remain stronger than in the opposite direction, we present evidence that US markets have started reacting also to euro area developments since the onset of EMU. Second, beyond these general linkages, the paper finds that certain macroeconomic news about the US economy have a large and significant effect on euro area money markets, and that these effects have become stronger in recent years. Finally, we show that US macroeconomic news have become good leading indicators for economic developments in the euro area. This indicates that the higher money market interdependence between the United States and the euro area is at least partly explained by the increased real integration of the two economies in recent years.

Purpose-The purpose of this paper is to analyze the information content of the Islamic interbank money market rate (IIMMR), with respect to several macroeconomic indicators such as output, inflation, exports, imports, bank loans and stock market index, and compare it against that of the conventional interbank money market rate using the Malaysian data. Design/methodology/approach-The paper relies on the causality tests based on the Toda-Yamamoto method, focusing on the period from January 2000 to December 2006. Findings-The results provide empirical support for the high information content of the IIMMR. Practical implications-A major implication of this study is that the IIMMR can be a reliable variable for monetary policy implementation in the Malaysian case. Originality/value-There have been no studies undertaken in the area of Islamic finance to analyze the information content of the Islamic money market rate to determine its possibility as a monetary policy variable. Alos, the paper enriches the literature by presenting the Malaysian experience in developing its Islamic interbank money market.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Contingent credit lines (CCLs) are widely used in bank lending and also play an important role in the functioning of short-term capital markets. Yet, their pricing and hedging has not received much attention in the finance literature. Using a financial engineering approach, the paper analyzes the structure of simple CCLs, examines methods for their pricing, and discusses the problems faced in hedging CCL portfolios.

Purpose-In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments. Design/methodology/approach-First, the paper explores the short and long-run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI). Findings-The findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful. Originality/value-The paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

This study examines the effectiveness of European Central Bank asset purchase program (quantitative easing) on the long-term interest rates. In particular, the study evaluates the effectiveness or influence of the European Central Bank’s non-conventional monetary policy tool, quantitative easing (also known as asset purchase program) on the yield of  5-year sovereign government bonds of Eurozone economies. The main objective and the motivation for this study is to provide the compact effects or influence of the quantitative easing in the Eurozone economies, as the current literature on quantitative easing insufficiently covers the effects of quantitative easing in the euro area. The duration of the quantitative easing or asset purchase program is from the end of 2014 until the first quarter of 2017; however, the currently available literature only studies the effects of the asset purchase program until mid of 2016. Very few researches are published after the completion of the quantitative program that estimates or evaluate the complete influence of the program on the long-term interest rates and economic indicators. Whereas, this research provides a complete solution to the literature gap by studying the influence of all the quantitative easing related announcements made by ECB from June 2014 to January 2017, or the whole period of extended asset purchase program conducted by ECB.
The research questions that the study aims to answer is that if the ECB announcements related to quantitative easing influence the long-term interest rates via influencing the 5-year government bonds. If the impact on the 5-year government bond yield is only influenced by those ECB announcements that contain new information related to asset purchase program. If the impact of quantitative easing or asset purchase program is larger on the weaker Eurozone economies namely Spain and Italy, as compared to the impact of the same program on stronger Eurozone economies including Germany and France
This research uses the event-study analysis methodology. Under the event study method, the research first estimates the abnormal variation in the yield of 5-year government bonds of the four largest Eurozone economies around the announcements made by European Central Bank regarding the quantitative easing or asset purchase program in the monetary policy statement. Later the study evaluates if abnormal variation in 5-year government bond yield around such announcements has statistical and economic significance. The sample of four 5-year government bonds of the four largest economies of Eurozone, namely Germany, France, Spain, and Italy, are considered for the research..
The research made key contributions to the literature on the subject of quantitative easing focused on the euro area. The statistical results of the research conclude that the ECB announcements negatively (decrease) influence the 5-year government bond yields. While the event-study results and the hypothesis revolve around measuring the effectiveness and influence of the non-conventional monetary policy tools used by ECB, the study also discovered a key pattern that the influence of such asset purchase program is much larger on weaker economies of the dataset like Spain and Italy, as compared to strong candidates i.e. Germany and France. The study also discovered that the abnormal variations in yields only occur around those central bank announcement that has a surprise element or that has a new information related the monetary policy.
The results of the study also show economic significance. The results show that at the initiation of the asset purchase program or quantitative easing, the inflation rates across Europe were between -1% to 0.8%, which is far below the optimal inflation rate of 2%. However, at the end of asset purchase program in the first quarter of 2017, the monthly inflation rates in Germany, France, Spain and Italy has increased to 2%, 1.4%, 2.6% and 2% respectively. At the beginning of the asset purchase program the quarterly GDP growth rate in sample countries was between -0.2% to 0.4%, whereas, at the end of the asset purchase program or quantitative easing in the second quarter of 2017, the quarterly GDP growth rate of Germany, France, Spain and Italy increased to 0.6%, 0.5%, 0.9% and 0.4% respectively. Hence all the results derived from the event-study analysis are consistent with the hypothesis proposed under this research.

Following a scarcity of dollar funding available internationally to banks and financial institutions, through 2008 the Federal Reserve expanded or established Temporary Reciprocal Currency Arrangements (Swap Lines) with fourteen foreign central banks. These central banks would have the capacity to use funds accessed through the swaps to provide dollar liquidity to institutions in their constituencies. In this paper, we focus on the elements of the dollar funding shortages that arose in 2007 and continued into 2009. In particular, we detail the market forces that contributed to the changing availability of dollars, with some focus on disruptions associated with money market funds and interbank lending activity. We also detail the forces behind the demand for dollars by globally-oriented banks. The paper then turns to the contribution of foreign exchange swap lines among central banks to reducing dollar funding pressures and limiting stresses in money markets, using for this purpose an analysis of high frequency data on funding costs in different currencies and tenors.