Abstract

We estimate the high frequency effects of dollar swap line announcements on asset prices. News about expanded dollar swap lines causes a reduction in liquidity premia and the VIX, a depreciation of the dollar, and an increase in equity prices. There is no change in short-term policy rates and the response of long-term government bond prices is mixed. These effects are qualitatively consistent with a model in which dollar swap lines increase the supply of safe dollar liquidity and affect allocations independent of conventional policy.