Lender of last resort: the concept in history
AbstractHenry Thornton (1760-1815) and Walter Bagehot (1826-1877) laid down a set of rules for stopping banking panics and crises. Known collectively as the classical theory of the lender of last resort, those rule stressed (1) protecting the aggregate money stock, not individual institutions, (2) letting insolvent institutions fail, (3) accommodating sound but temporarily illiquid institutions only, (4) charging penalty rates, (5) requiring good collateral, and (6) preannouncing these conditions in advance of crises so as to remove uncertainty. These precepts continue to inform central bank policy today.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Richmond in its journal Economic Review.
Volume (Year): (1989)
Issue (Month): Mar ()
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Goodhart, Charles A.E. & Huang, Haizhou, 2005. "The lender of last resort," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(5), pages 1059-1082, May.
- Eric Maskin & Chenggang Xu, 2001.
"Soft budget constraint theories: From centralization to the market,"
The Economics of Transition, The European Bank for Reconstruction and Development,
The European Bank for Reconstruction and Development, vol. 9(1), pages 1-27, March.
- Maskin, Eric & Xu, Cheng-Gang, 2001. "Soft Budget Constraint Theories: From Centralization to the Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2715, C.E.P.R. Discussion Papers.
- Xavier Freixas, 2009.
"Monetary policy in a systemic crisis,"
Economics Working Papers
1200, Department of Economics and Business, Universitat Pompeu Fabra.
- Xavier Freixas, 2009. "Monetary policy in a systemic crisis," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 25(4), pages 630-653, Winter.
- George G. Kaufman, 1998. "Central banks, asset bubbles, and financial stability," Working Paper Series, Federal Reserve Bank of Chicago WP-98-12, Federal Reserve Bank of Chicago.
- Smith, R. Todd & van Egteren, Henry, 2005. "Interest rate smoothing and financial stability," Review of Financial Economics, Elsevier, Elsevier, vol. 14(2), pages 147-171.
- Xavier Freixas & Bruno Maria Parigi, 2008. "Lender of Last Resort and Bank Closure Policy," CESifo Working Paper Series 2286, CESifo Group Munich.
- Walker F. Todd & James B. Thomson, 1990. "An insider's view of the political economy of the too big to fail doctrine," Working Paper 9017, Federal Reserve Bank of Cleveland.
- RÃ¶theli, Tobias F., 2010. "Causes of the financial crisis: Risk misperception, policy mistakes, and banks' bounded rationality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 39(2), pages 119-126, April.
- Esther Jeffers, 2009. "Action du prÃªteur en dernier ressort : quâ€™avons-nous appris lors de cette crise ?," Revue d'Ã‰conomie FinanciÃ¨re, Programme National PersÃ©e, Programme National PersÃ©e, vol. 94(1), pages 241-249.
- Michael D. Bordo, 1998. "The financial crisis of 1825 and the restructuring of the British financial system - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 77-82.
- Arie Arnon, 2007. "The Early Round Of The Bullionist Debate 1800-1802: Boyd, Baring And Thorntonâ€™S Innovative Ideas," Working Papers, Ben-Gurion University of the Negev, Department of Economics 0714, Ben-Gurion University of the Negev, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (William Perkins).
If references are entirely missing, you can add them using this form.