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Discussion Paper
The European Debt Crisis and the Dollar Funding Gap
Against the backdrop of the ongoing debt crisis in Europe, the difficulties faced by European banks in borrowing U.S. dollars have attracted increased attention. The inability to borrow dollars has been partially responsible for European banks? decisions to sell dollar-denominated assets and reduce their lending activity in the United States, to the possible detriment of U.S. companies and global financial markets. In this post, we discuss the genesis of European banks? dollar funding gap problem and the steps taken by central banks to help fill this gap. While we focus on European banks in ...