American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
The High-Frequency Effects of Dollar Swap Lines
American Economic Review: Insights
vol. 7,
no. 1, March 2025
(pp. 107–23)
Abstract
We study the effects of dollar swap lines using high-frequency responses in asset prices around policy announcements. News about expanded dollar swap lines causes a reduction in liquidity premia, compression of deviations from covered interest parity, and depreciation of the dollar. Equity prices rise and the VIX falls, while the response of long-term government bond prices is mixed. The cross section of high-frequency responses implies that swap lines affect the dollar factor or the price of risk. Our findings are qualitatively consistent with models relating the supply of dollar liquidity to the broader economy.Citation
Kekre, Rohan, and Moritz Lenel. 2025. "The High-Frequency Effects of Dollar Swap Lines." American Economic Review: Insights 7 (1): 107–23. DOI: 10.1257/aeri.20230667Additional Materials
JEL Classification
- E43 Interest Rates: Determination, Term Structure, and Effects
- E44 Financial Markets and the Macroeconomy
- E58 Central Banks and Their Policies
- F31 Foreign Exchange
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G13 Contingent Pricing; Futures Pricing; option pricing
- G15 International Financial Markets