Question:
What is a central bank swap arrangement?
(1) An arrangement between central banks to exchange goods and services.
(2) A bilateral agreement between central banks to exchange currencies to stabilize exchange rates or provide liquidity.
(3) A mechanism to regulate interest rates between countries.
(4) A tool to directly influence a country’s stock market.
(5) An agreement between central banks to sell and purchase government bonds in foreign currencies.
Correct Answer:
(2)
Answer Explanation:
A currency swap line is a bilateral agreement between two central banks to exchange a given amount of their respective currencies at a specified rate. This is used as a critical safety net to provide emergency foreign exchange liquidity and stabilize markets during times of crisis.
Topic: Global Economy Year: 2024
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