ECB Euro Liquidity Lines
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Summary:
Central bank liquidity lines have gained momentum since the global financial crisis as a crosscurrency liquidity management tool. We provide a complete timeline of the ECB liquidity line announcements and study their signalling and spillback effects. The announcement of an ECB euro liquidity line decreases the premium paid by foreign agents to borrow euros in FX markets relative to currencies not covered by these facilities by 51 basis points. Consistent with a stylized model, bank equity prices increase by around 1.75% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.
Series:
Working Paper No. 2023/096
Subject:
Asset and liability management Asset prices Currencies Currency markets Currency swaps Financial markets Foreign exchange Liquidity Money Prices
Frequency:
regular
English
Publication Date:
May 5, 2023
ISBN/ISSN:
9798400240881/1018-5941
Stock No:
WPIEA2023096
Format:
Paper
Pages:
58
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