From Bazooka to Backstop: The Political Economy of Standing Swap Facilities

Mathis L. Richtmann, Lea Steininger

Publication: Working/Discussion PaperWU Working Paper

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Abstract

The permanent international lender of last resort consists of a swap line network between six major central banks, centering around the US Federal Reserve. Arguably, this network is a solution to a long debated problem as it provides public emergency liquidity provision to the world's largest financial market, the Eurodollar market. Drawing on exclusive interviews with monetary technocrats as well as a textual analysis of Federal Open Market Committee meeting transcripts over the course of 14 years, we reconstruct how this facility came into being. Building on Kalyanpur (2017) and Braun (2015), we develop an interpretative framework of bricolage to set the formation into context: In times of crises, central bankers rely on retrospection, experimentation, and creative re-deployment to develop their tools. However, in non-crises times, those tools prevail which offer what we coin 'bureaucratic familiarity'.
Original languageEnglish
PublisherWU Vienna University of Economics and Business
DOIs
Publication statusPublished - Feb 2023

Publication series

SeriesDepartment of Economics Working Paper Series
Number334

WU Working Paper Series

  • Department of Economics Working Paper Series

Keywords

  • Standing Swap Facilities
  • lender of last resort
  • International Monetary Policy
  • Central Bank Cooperation
  • Monetary Technocrats

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