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A Selective Bail-Out International Lending of Last Resort Model

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  • Cecile Bastidon

    (Departement Finance, LEAD, Universite du Sud)

  • Philippe Gilles

    (Departement Finance, LEAD, Universite du Sud)

  • Nicolas Huchet

    (Departement Finance, LEAD, Universite du Sud
    CEFI, Universite de la Mediterranee)

Abstract

In the event of third generation crisis, international lending of last resort should be used if and only if the ILLOR is informed on the subject of financial and banking domestic markets. Therefore, if will act at a macroeconomic level, as a usual ILLOR, but also at a microeconomic level, since there will be selective lending to commercial banks. Our model shows that there are two conditions of optimality of this intervention: first, the country should be eligible; second, only solvent banks should be bailed out.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 9 (2008)
Issue (Month): 1 (May)
Pages: 103-114

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Handle: RePEc:cuf:journl:y:2008:v:9:i:1:p:103-114

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Related research

Keywords: Lender of last resort; Capital account crises; Systematic risk; Financial stability; Inter-Bank market;

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References

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