The Global Financial Crisis and Offshore Dollar Markets
Year: 2009
Type: article
Abstract: Facing a shortage of U.S. dollars and a growing need to support their dollar-denominated assets during the financial crisis, international firms increasingly turned to the foreign exchange swap market and other secured funding sources. An analysis of the ensuing strains in the swap market shows that the dollar “basis”— the premium international institutions pay for dollar funding— became persistently large and positive, chiefly as a result of the higher funding costs paid by smaller firms and non-U.S. banks. The widening of the basis underscores the severity and breadth of the crisis as markets designed to facilitate the flow of dollars faltered and institutions worldwide struggled to obtain funds. The financial crisis that began in the fall of 2007 caused a shortage of dollars just when banking institutions around the world needed them most. 1 Facing potential losses from their credit- and mortgage-related products, U.S. and non-U.S. banks alike began to worry about their ability to fund operations and, as a
Institutions: Federal Reserve, Federal Reserve Bank of New York
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2140947418