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Kindleberger in retrospect: the Federal Reserve’s dollar swap lines and international lender of last resort rules
[Selective swap arrangements and the global financial crisis: analysis and interpretation]

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  • Emmanuel Carré
  • Laurent Le Maux

Abstract

Our paper shows how Charles P. Kindleberger examined the function of the international lender of last resort and anticipated the rules governing the dollar swap line program (with unlimited amounts and at a fixed price) implemented by the Federal Reserve in the aftermath of the failure of Lehman Brothers in September 2008. We systematically explore Kindleberger’s works on the central bank swap agreement in order to discern the theoretical foundations of the international lender of last resort rules he proposed. In this respect, two of his arguments that appear concomitantly must be distinguished. The first concerns the burden that the leadership partly or mostly should shoulder because of the problem of free riding—this is the traditional argument of benevolent leadership. The second argument concerns the efficiency with which the leadership operates as the stabilizer given the international monetary and financial context—this argument of the efficient stabilizer has been far less studied in the literature. We find that the Federal Reserve was not a benevolent monetary institution, but the global financial stabilizer instead—meaning that Kindleberger’s second argument finally prevailed. We conclude by emphasizing how central bankers rediscovered Kindleberger’s contribution to the international lender of last resort function.

Suggested Citation

  • Emmanuel Carré & Laurent Le Maux, 2022. "Kindleberger in retrospect: the Federal Reserve’s dollar swap lines and international lender of last resort rules [Selective swap arrangements and the global financial crisis: analysis and interpre," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(2), pages 448-463.
  • Handle: RePEc:oup:indcch:v:31:y:2022:i:2:p:448-463.
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    File URL: http://hdl.handle.net/10.1093/icc/dtab040
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    Cited by:

    1. Emmanuel Carré & Laurent Le Maux, 2024. "Bernanke and Kindleberger on financial crises, 1978–2003," Oxford Economic Papers, Oxford University Press, vol. 76(2), pages 314-329.

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