Evolution of Bilateral Swap Lines

IMF Working Papers, August 6, 2021

Source details

Constructs a comprehensive database of bilateral swap lines (BSLs) based on publicly available information, including after the onset of the COVID-19 pandemic.
Provides results of regression analysis exploring several empirical questions not covered in previous studies.

Documents the evolution of BSLs into an important part of the Global Financial Safety Net (GFSN).
Some BSLs helped to stabilize financial markets during both the Global Financial Crisis (GFC) and the COVID-19 pandemic.
Analysis suggests that countries on the recipient side of BSLs are more likely to sign and renew BSLs designed to alleviate balance of payments needs as their external position weakens.
U.S. Federal Reserve BSLs appear to have been effective at stabilizing financial market conditions during the COVID-19 pandemic.

BSLs can play a stabilizing role in crisis episodes and thus form an integral component of the GFSN.
Monitoring recipient countries’ external positions can help predict demand for BSL arrangements intended to address balance of payments needs.
The effectiveness of U.S. Federal Reserve BSLs during COVID-19 underscores the potential role of major central bank swap networks (Fed swap network, Federal Reserve BSL) in market stabilization during global stress.