The Use of Foreign Exchange Swaps by Central Banks: A Survey
IMF Working Papers, August 1, 1993
Source details
- Canonical URL
- The Use of Foreign Exchange Swaps by Central Banks: A Survey
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Bibliographic details
- Authors: Catharina J. Hooyman
- Published: August 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451848489.001
Executive summary
- The paper discusses the use of foreign exchange swaps by central banks.
- Purposes of use identified:
- Affecting domestic liquidity.
- Managing foreign exchange reserves.
- Stimulating domestic financial markets.
- The paper cautions about using foreign exchange swaps to defend a particular exchange rate when foreign exchange reserves are under pressure.
- It notes that the use of foreign exchange swaps by central banks has been losing importance.
Findings and evidence
- The paper:
- Discusses different uses of foreign exchange swaps.
- Presents evidence for a selected group of countries.
- Subject areas covered: Banking, Currencies, Currency markets, Currency swaps, Exchange rates, Financial markets, Foreign exchange, Money.
- Keywords explicitly listed include: Africa, central bank loss, central bank need, Currencies, currency, Currency markets, Currency swaps, dollar, Exchange rates, Fed issues dollar, forward market, Global, Kuwaiti dinar, market, profit and loss account, swap, swap facility, swap operation, swap transaction, Turkish lira, U.S. dollar, U.S. dollar swap facility, WP.
Policy implications and cautions
- Caution: Using foreign exchange swaps to defend a particular exchange rate can be risky when foreign exchange reserves are under pressure.
- Implicit policy considerations:
- Central banks should weigh effects on domestic liquidity when using swaps.
- Swap operations interact with reserve management and domestic market development objectives.