Financial Stability
2 articles
How a Central Bank Digital Currency Could Rewire Monetary Policy — and Why Design Choices Decide Whether It Stabilizes or Destabilizes
Central bank digital currencies (CBDCs) can significantly alter monetary policy transmission, with their impact on financial stability hinging critically on design choices like remuneration and holding limits. Strategic design is essential to balance enhancing policy effectiveness with preserving the stability of commercial banks.
How Central Bank Currency Swap Lines Work, From First Exchange to Bank Lending
Currency swap lines are standing agreements between central banks that allow them to borrow each other's currency, serving as a critical tool for providing dollar liquidity to foreign commercial banks during times of financial stress. The article details their step-by-step mechanics, historical evolution from dollar defense to a global safety net, and their crucial role in managing crises like the GFC and COVID-19.