The US as ‘Sovereign International Last-Resort Lender’: The Fed's Currency Swap Programme during the Great Panic of 2007–09

McDowell, Daniel

doi:10.1080/13563467.2010.542235

Cited by 55 publications

(27 citation statements)

References 16 publications

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“…European countries have also acquired a unique capacity to create liquidity through the creation of the euro, which has become the world's second most important trade, investment and reserve currency (Otero-Iglesias and Steinberg, 2012). The swap agreements that the Federal Reserve provided with 14 foreign central banks -during 2007 and 2008, peaking at nearly $600 billion in December 2008 -clearly reflected the "going-it-alonepower" of the US in terms of international financial crisis management: the dominance of the US dollar in the global financial system gave the US a unique capacity to act as international lender of last-resort by issuing unlimited amounts of required US dollars (McDowell, 2012). In a similar vein, the euro strengthened the Eurozone countries' capacity for international financial crisis management -especially since the ECB assumed a more activist role during its management of the Eurozone crisis.…”

Section: Explaining the Modest Results Of The 2010 Reformmentioning

confidence: 98%

“…The position of the US dollar as the world's pre-eminent international currency gave the US an extraordinary "power to create credit" and allowed it -in principle at least -to unilaterally assume the role of global financial stabilizer (Helleiner, 2006;McDowell, 2012). European countries have also acquired a unique capacity to create liquidity through the creation of the euro, which has become the world's second most important trade, investment and reserve currency (Otero-Iglesias and Steinberg, 2012).…”

Section: Explaining the Modest Results Of The 2010 Reformmentioning

confidence: 99%

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Rising Powers and Multilateral Institutions

Lesage¹,

Graaf²

2015

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The global political economy is in flux as a series of cumulative crises impacts its organization and governance. The IPE series has tracked its development in both analysis and structure over the last three decades. It has always had a concentration on the global South. Now the South increasingly challenges the North as the centre of development, also reflected in a growing number of submissions and publications on indebted Eurozone economies in Southern Europe.An indispensable resource for scholars and researchers, the series examines a variety of capitalisms and connections by focusing on emerging economies, companies and sectors, debates and policies. It informs diverse policy communities as the established trans-Atlantic North declines and 'the rest', especially the BRICS, rise.

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Section: Explaining the Modest Results Of The 2010 Reformmentioning

confidence: 98%

Section: Explaining the Modest Results Of The 2010 Reformmentioning

confidence: 99%

Rising Powers and Multilateral Institutions

Lesage¹,

Graaf²

2015

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“…In the 8 December 2008 ASEAN+3 finance ministers meeting -the first to be held after the September 2008 collapse of Lehman Brothers, the members quickly agreed to accelerate CMIM and to increase the committed funds by 50%. 11 Second, a near-crisis in South Korea in October 2008 revealed a major functional gap in the CMI's safety net (Kawai, 2009(Kawai, , 2010McDowell, 2012). Despite accumulated foreign exchange reserves of approximately $200 billion, 12 the Korean banking system was running low on dollars and was unable to borrow them on international markets.…”

Section: Effects Of the Global Financial Crisismentioning

confidence: 99%

“…Most of that literature, like most swap lines, is focused on central bank swaps (Aizenman, Jinjarak, & Park, 2010;Goldberg, Kennedy, & Miu, 2011;Liao & McDowell, 2014;McDowell, 2012). McDowell (2012) makes the argument that official swap lines are effectively a central feature of the global financial system, with the US Federal Reserve taking the role of 'international lender of last resort'. 4 The central role of the Federal Reserve is explained by the key currency role of the dollar, which is, as Goldberg et al (2011) point out, heightened in times of crisis.…”

Section: The Argument In Briefmentioning

confidence: 99%

East Asian financial regionalism: why economic enhancements undermine political sustainability

Grimes

2015

Contemporary Politics

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East Asian financial regionalism was born in response to the Asian Financial Crisis of 1997-1998. The centrepiece of financial regionalism was the Chiang Mai Initiative (CMI), an emergency liquidity mechanism created by the ASEAN+3. It embodied both a clear interpretation of what had gone wrong in 1997-1998 and an understanding of the need for institutions that would be politically viable despite Sino-Japanese rivalry. Enforcement under CMI relied on the 'IMF link' -release of funds would be predicated on crisis countries' initiating negotiations with the International Monetary Fund (IMF), as a means of reducing moral hazard, enforcing conditionality and diverting blame from the leading creditors, Japan and China. The global financial crisis of 2008-2010 and the eurozone crisis that followed have inspired important changes meant to address CMI's economic gaps, including accelerated adoption of 'CMI Multilateralization' (CMIM), the creation of a new surveillance unit (ASEAN+3 Macroeconomic Research Organization, or AMRO), and the establishment of a new precautionary line. Many observers have remarked that these developments weaken the IMF link, which had effectively subordinated CMI to the IMF. While the moves appear to demonstrate a more confident, autonomous regionalism and a relative devaluation of the US-dominated global financial institutions, this paper argues that in fact, the ASEAN+3 states have again unearthed the underlying politics of divided leadership and mutual suspicion. CMIM is now threatened by the renewed potential for internal divisions. Further complicating the picture, both China and Japan have recently established large bilateral swap lines outside of the CMIM framework with several of their ASEAN+3 partners, raising the question of whether CMIM is moving towards political irrelevance even as it has arrived at a high water mark in its institutional development.

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“…Unlike America's Federal Reserve Board (or Fed), for example, the ECB does not have a long list of client central banks clamouring to set up swap lines so they can obtain access to the euro for use as a monetary asset. Indeed, during the peak of the 2008/09 crisis, the ECB was in some respects just one more spoke in the Fed's elaborate swap network (McDowell 2012). Simply put, the political infrastructure necessary to support an international currency does not seem to be in place for the euro.…”

mentioning

confidence: 99%

The political economy of failure: The euro as an international currency

Germain

Schwartz

2014

Review of International Political Economy

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This is the accepted version of the paper.This version of the publication may differ from the final published version. In this essay we consider these perennial questions of modern IPE scholarship in reverse order to ask whether the euro could ever have become, or seek to become, a true international currency rivalling the US dollar, used not only for passive foreign exchange reserves but also as a major commercial currency outside the EU. We argue that the EU lacks the will, the ideas and the capacity to promote the euro into the status of an international currency. In this article, we concentrate on this final issue of capacity, as the will and ideas issues have already been well explored. Capacity is an issue coeval with, if not prior to, the first two issues. The EU's current institutional arrangements and its economic geography create macro--economic consequences that diminish the euro's capacity to operate as a top currency. These conflicts go beyond the well--recognized issue that the euro--zone is not an optimum currency area. Examining the euro's debilities sheds light not only on the euro's (in)capacity to rival the dollar as an international currency, but also on the future of both the euro and the dollar in the aftermath of the euro--zone crisis. Permanent repository link

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The US as ‘Sovereign International Last-Resort Lender’: The Fed's Currency Swap Programme during the Great Panic of 2007–09

Cited by 55 publications

References 16 publications

Rising Powers and Multilateral Institutions

Rising Powers and Multilateral Institutions

East Asian financial regionalism: why economic enhancements undermine political sustainability

The political economy of failure: The euro as an international currency

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