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On the Need for an International Lender of Last Resort

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  • Stanley Fischer
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    Abstract

    Is there a useful function for an international lender of last resort (ILLR)--defined as crisis lender and crisis manager? Yes for international capital flows are excessively volatile and contagious, and because an ILLR can help mitigate the effects of this instability. I examine the Bagehot rules, and their applicability in an international context, focusing on the problem of moral hazard. I argue that a critical condition for the successful operation of an ILLR, a role that is to an important extent played by the IMF, is to ensure private sector involvement in the resolution of emerging market financial crises.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.13.4.85
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 13 (1999)
    Issue (Month): 4 (Fall)
    Pages: 85-104

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    Handle: RePEc:aea:jecper:v:13:y:1999:i:4:p:85-104

    Note: DOI: 10.1257/jep.13.4.85
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    1. Marvin Goodfriend & Jeffrey M. Lacker, 1999. "Limited commitment and central bank lending," Working Paper 99-02, Federal Reserve Bank of Richmond.
    2. Frederic S. Mishkin, 2000. "Lessons from the Asian Crisis," NBER Working Papers 7102, National Bureau of Economic Research, Inc.
    3. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
    4. Haizhou Huang & Charles Goodhart, 1999. "A Model of the Lender of Last Resort," FMG Discussion Papers dp313, Financial Markets Group.
    5. Bengt Holmstrom & Jean Tirole, 1996. "Private and Public Supply of Liquidity," NBER Working Papers 5817, National Bureau of Economic Research, Inc.
    6. Hirsch, Fred, 1977. "The Bagehot Problem," The Manchester School of Economic & Social Studies, University of Manchester, vol. 45(3), pages 241-57, September.
    7. Thomas H. Humphrey & Robert E. Keleher, 1984. "The Lender of Last Resort; A Historical Perspective," Cato Journal, Cato Journal, Cato Institute, vol. 4(1), pages 275-321, Spring/Su.
    8. Robert A. Mundell, 1983. "International Monetary Options," Cato Journal, Cato Journal, Cato Institute, vol. 3(1), pages 189-210, Spring.
    9. Thomas M. Humphrey, 1975. "The classical concept of the lender of last resort," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 2-9.
    10. Thomas M. Humphrey & Robert E. Keleher, 1984. "The lender of last resort : a historical perspective," Working Paper 84-03, Federal Reserve Bank of Richmond.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 'The Crisis as a Classic Financial Panic'
      by Mark Thoma in Economist's View on 2013-11-09 15:59:21
    2. The Crisis as a Classic Financial Panic
      by Guest Author in Credit Writedowns on 2013-11-11 00:00:05
    3. The Crisis as a Classic Financial Panic
      by Barry Ritholtz in The Big Picture on 2013-11-10 10:00:37
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