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Journal Article
The Fed’s Central Bank Swap Lines and FIMA Repo Facility
Building on the facility design and application experience from the global financial crisis, in March 2020 the Federal Reserve eased the terms on its standing swap lines in collaboration with other central banks, reactivated temporary swap agreements, and introduced the new Foreign and International Monetary Authorities (FIMA) Repo Facility. While these facilities have similarities, they differ in their operations, breadth of counterparties, and range of potential effects. This article provides key details on these facilities and highlights evidence that they can reduce strains in global ...
Discussion Paper
Would a Stronger Renminbi Narrow the U.S.-China Trade Imbalance?
The United States buys much more from China than it sells to China—an imbalance that accounts for almost half of our overall merchandise trade deficit. China’s policy of keeping its exchange rate low is often cited as a key driver of that country’s large overall trade surplus and of its bilateral surplus with the United States. The argument is that a stronger renminbi (the official currency of China) would help reduce that country’s trade imbalance with the United States by lowering the prices of U.S. goods relative to those made in China. In this post, we examine the thinking behind ...
Discussion Paper
The U.S. Dollar’s Global Roles: Revisiting Where Things Stand
Will developments in technology, geopolitics, and the financial market reduce the dollar’s important roles in the global economy? This post updates prior commentary [here, here, and here], with insights about whether recent developments, such as the pandemic and the sanctions on Russia, might change the roles of the dollar. Our view is that the evidence so far points to the U.S. dollar maintaining its importance internationally. A companion post reports on the Inaugural Conference on the International Roles of the U.S. Dollar jointly organized by the Federal Reserve Board and Federal ...
Discussion Paper
The Effect of the Strong Dollar on U.S. Growth
The recent strengthening of the U.S. dollar has raised concerns about its impact on U.S. GDP growth. The U.S. dollar has appreciated around 12 percent since mid-2014, rising against almost all of our trading partners, with the largest gains against Japan, Mexico, Canada, and the euro area. There was far less movement against newly industrial Asian economies and hardly any change against China. In this blog, we ask how the strength of the dollar affects U.S. GDP growth. Although the dollar can impact the U.S. growth through a number of different channels, we focus on the direct impact through ...
Journal Article
Is Dollar Dominance in Doubt?
The dollar has been the global currency of choice for nearly a century, but in light of recent U.S.-led financial sanctions, some wonder whether that status will endure.
Working Paper
Dollar Shortages, CIP Deviations and the Safe Haven Role of the Dollar
Since 2007, an increase in risk or risk aversion has resulted in a U.S. dollar appreciation and greater deviations from covered interest parity (CIP). In contrast, prior to 2007, risk had no impact on the dollar, and CIP held. To explain these phenomena, we develop a two-country model featuring (i) market segmentation, (ii) limited CIP arbitrage (since 2007) and (iii) global dollar dominance. During periods of heightened global financial stress, dollar shortages in the offshore market emerge, leading to increased CIP deviations and a dollar appreciation. The appreciation occurs even in the ...
Report
Gender differences in the labor market effects of the dollar
Although the dollar has been shown to influence the expected wages of workers, the analysis to date has focused on the male workforce. We show that exchange rate fluctuations also have important implications for women's wages. The dominant wage effects for women?like those for men?arise at times of job transition. Changes in the value of the dollar can cause the wage gap between women who change jobs and women who stay on in their jobs to expand or contract sharply, with the most pronounced effects occurring among the least educated women and women in highly competitive manufacturing ...
Report
COVID Response: The Fed’s Central Bank Swap Lines and FIMA Repo Facility
Building on the facility design and application experience from the period of the global financial crisis, in March 2020 the Federal Reserve eased the terms on its standing swap lines in collaboration with other central banks, reactivated temporary swap agreements, and then introduced the new Foreign and International Monetary Authorities (FIMA) repo facility. While these facilities share similarities, they are different in their operations, breadth of counterparties and potential span of effects. This article provides key details on these facilities and evidence that the central bank swap ...
Discussion Paper
The Fed’s Inaugural Conference on the International Roles of the U.S. Dollar
The U.S. dollar has played a preeminent role in the global economy since the second World War. It is used as a reserve currency and the currency of denomination for a large fraction of global trade and financial transactions. The status of the U.S. dollar engenders important considerations for the effectiveness of U.S. policy instruments and the functioning of global financial markets. These considerations include understanding potential factors that may alter the dominance of the U.S. dollar in the future, such as changes in the macroeconomic and policy environments or the development of new ...
Discussion Paper
Foreign Banking Organizations in the United States and the Price of Dollar Liquidity
Foreign banking organizations (FBOs) in the United States play an important role in setting the price of short-term dollar liquidity. In this post, based on remarks given at the 2022 Jackson Hole Economic Policy Symposium, we highlight FBOs’ activities in money markets and discuss how the availability of reserve balances affects these activities. Understanding the dynamics of FBOs’ business models and their balance sheet constraints helps us monitor the evolution of liquidity conditions during quantitative easing (QE) and tightening (QT) cycles.