Besides the simultaneous liquidity injections in domestic currencies that took place in many advanced economies, the ECB was able also to rapidly provide ample liquidity in dollars thanks to swap agreements with the Federal Reserve.2 Despite these unprecedented interventions, and similar measures implemented in the US, in October 2008 Lehman Brothers collapsed wrecking havoc on international financial markets and the world economy.
The spiralling of the crisis is evident if we look at the Libor-OIS and Euribor-OIS spreads in Chart 2. The ECB’s response to the crisis was swift and combined a mix of standard and nonstandard monetary policy measures.