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From Lombard Street to Avenida Paulista: Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008–09
Author:
Mr. Mark R. Stone
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,
W. Christopher Walker
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, and
Yosuke Yasuinull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 259
Language:
English
Publication Date:
01 Nov 2009
DOI:
https://doi.org/10.5089/9781451874051.001
ISBN:
9781451874051
ISSN:
1018-5941
Pages:
35
Keywords:
WP; dollar; central bank
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The provision of foreign exchange liquidity by emerging market central banks during the global shock of 2008-09 departs from the domestic liquidity lender of last resort role described by Bagehot in his classic "Lombard Street." This paper documents and analyzes the foreign exchange liquidity providing measures of the Banco Central do Brasil (BCB) in response to varied market stresses. These measures appear to have reduced the relative onshore cost of dollar liquidity on impact and seemed to stabilize market expectations of exchange rate volatility. The results suggest that foreign exchange liquidity easing operations may become a standard central bank tool.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2009: Issue 259