Research / BFI Working PaperNov 27, 2023

The High Frequency Effects of Dollar Swap Lines

Rohan Kekre, Moritz Lenel

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 (CIP), 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.

More Research From These Scholars

BFI Working Paper May 2, 2022

Monetary Policy, Redistribution, and Risk Premia

Rohan Kekre, Moritz Lenel
Topics:  Monetary Policy, Financial Markets
BFI Working Paper Jan 12, 2023

The Macroeconomics of the Greek Depression

Rohan Kekre, Gabriel Chodorow-Reich, Loukas Karabarbounis
Topics:  Tax & Budget
BFI Working Paper Jul 5, 2023

The Flight to Safety and International Risk Sharing

Rohan Kekre, Moritz Lenel
Topics:  Monetary Policy