On the need for an international lender of last resort: Lessons from domestic financial markets
AbstractThe increasing incidence and intensity of crises in the international financial markets during the 1990s have given new impetus to the debate on reform of the international financial system. Much of the discussion focuses on the idea of an international lender of last resort which could provide liquidity to ensure the stability of the international financial system. This paper responds to the question of whether an international lender of last resort is necessary by presenting both the differences and the similarities between a domestic financial market and an international one. This comparison will show that in regard to those aspects which justify the existence of a lender of last resort at the national level, the two types of financial markets are no different: If commercial banks are engaging in maturity and liquidity transformation, then the existence of a lender of last resort is a prerequisite to stable and crisis-free development of financial markets. Both the recent financial crises, and the developments which can be observed in the banking sectors of Latin America and Eastern Europe, provide empirical evidence for this thesis. In these regions, banking sectors are emerging which are increasingly dominated by foreign banks, and thus have indirect access to an international lender of last resort. At the same time, there is an increasing tendency within emerging markets to introduce regulations which limit the extent to which transformation is performed in financial markets, and thus to limit as far as possible the risks which make an international lender of last resort necessary. --
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 InfoPaper provided by University of Würzburg, Chair for Monetary Policy and International Economics in its series W.E.P. - Würzburg Economic Papers with number 28.
Date of creation: 2001
Date of revision:
Contact details of provider:
Postal: Sanderring 2, D-97070 Würzburg
Phone: (0931) 31-2901
Fax: (0931) 31-2101
Web page: http://www.vwl.uni-wuerzburg.de/en/no_cache/lehrstuehle/vwl1/home/
More information through EDIRC
lender of last resort; maturity transformation; liquidity transformation; financial crisis; currency crisis;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anna J. Schwartz, 1999. "Is There a Need for an International Lender of Last Resort?," Cato Journal, Cato Journal, Cato Institute, vol. 19(1), pages 1-6, Spring/Su.
- Calomiris, Charles W. & Schweikart, Larry, 1991. "The Panic of 1857: Origins, Transmission, and Containment," The Journal of Economic History, Cambridge University Press, vol. 51(04), pages 807-834, December.
- Robert Flood & Nancy Marion, 1998.
"Perspectives on the Recent Currency Crisis Literature,"
NBER Working Papers
6380, National Bureau of Economic Research, Inc.
- Flood, Robert & Marion, Nancy, 1999. "Perspectives on the Recent Currency Crisis Literature," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-26, January.
- Nancy P. Marion & Robert P. Flood, 1998. "Perspectives on the Recent Currency Crisis Literature," IMF Working Papers 98/130, International Monetary Fund.
- Bencivenga, V.R. & Smith, B.D., 1988.
"Financial Intermediation And Endogenous Growth,"
RCER Working Papers
124, University of Rochester - Center for Economic Research (RCER).
- Haizhou Huang & C. A. E. Goodhart, 2000.
"A Simple Model of an International Lender of Last Resort,"
IMF Working Papers
00/75, International Monetary Fund.
- Haizhou Huang & Charles Goodhart, 1999. "A Simple Model of an International Lender of Last Resort," FMG Discussion Papers dp336, Financial Markets Group.
- Caprio, Gerard Jr. & Dooley, Michael & Leipziger, Danny & Walsh, Carl, 1996.
"The lender of last resort function under a currency board : the case of Argentina,"
Policy Research Working Paper Series
1648, The World Bank.
- Gerald Caprio & Michael Dooley & Danny Leipziger & Carl Walsh, 1996. "The lender of last resort function under a currency board: The case of Argentina," Open Economies Review, Springer, vol. 7(1), pages 625-650, March.
- Dowd, Kevin, 1994. "Competitive Banking, Bankers' Clubs, and Bank Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 289-308, May.
- Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
- Dowd, Kevin, 1996. "The Case for Financial Laissez-Faire," Economic Journal, Royal Economic Society, vol. 106(436), pages 679-87, May.
- Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussÃ£o 400, Department of Economics PUC-Rio (Brazil).
- Adalbert Winkler, 2010.
"The Financial Crisis : A Wake-Up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?,"
Finance Working Papers
22022, East Asian Bureau of Economic Research.
- Adalbert Winkler, 2010. "The Financial Crisis: A Wake-Up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?," Working Papers id:3021, eSocialSciences.
- Winkler, Adalbert, 2010. "The Financial Crisis: A Wake-Up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?," ADBI Working Papers 199, Asian Development Bank Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.