Evolving norms regarding central bank credit lines: a global liquidity backstop?

Central bank credit lines have been instrumental in ensuring global financial stability during the Global Financial Crisis (2007-2010) and the COVID-19 crisis (2020) and have therefore become an important concern of international political economy scholarship. This paper contributes to the debate on why key currency-issuing central banks provide credit lines and compares the US Federal Reserve’s and the European Central Bank's (ECB) credit lines since 2007. In contrast with extant research that has highlighted material interests as underpinning the provision of credit lines, this paper stresses the role of evolving norms and institutions. Cooperation among G10 central banks is by now well-established and represents an important global liquidity backstop. However, the ECB’s and the Fed’s support for emerging market economies and the coordination of central bank credit lines with the International Monetary Fund remain uneven. Going forward, both the ECB and the Fed will have to navigate between established norms around central bank cooperation and increased pressure to use credit lines as a tool of geopolitics.