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Central banks and financial stability: rediscovering the lender-of-last-resort practices in a finance economy

Author

Listed:
  • Laurent Le Maux

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Laurence Scialom

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

The purpose of our paper is to assess whether central banks have adopted new practices of lending in last resort during the 2007–09 financial crisis. We compare the current period with the classical period, both featured by a finance economy with developed financial markets and unregulated institutions. Beyond the differences determined by the monetary regime and concerning the central bank rate policy, we find similarities such as the enlargements of the set of counterparties and eligible collateral assets. Since the credit system is based on financial markets and innovations, central banks have a wider involvement that goes beyond a narrow conception of the lender of last resort that prevailed under a regulated banking system. We conclude that the historical roots of financial stabilisation by central banks in a finance economy have just been rediscovered, and that the functions of lender of last resort and market maker of last resort may be analytically integrated. Copyright , Oxford University Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Laurent Le Maux & Laurence Scialom, 2013. "Central banks and financial stability: rediscovering the lender-of-last-resort practices in a finance economy," Post-Print hal-01385834, HAL.
    • Handle: RePEc:hal:journl:hal-01385834
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    Cited by:

    1. Mike Anson & David Bholat & Miao Kang & Ryland Thomas, 2017. "The Bank of England as lender of last resort: new historical evidence from daily transactional data," Bank of England working papers 691, Bank of England.
    2. Bryane Michael & Svitlana Osaulenko, 2021. "TOWARD A NEW COMPARATIVE PUBLIC LAW OF CENTRAL BANK LEGISLATION: Designing Legislative Mandates for Central Bank Private Securities Assets Purchases and Nominal GDP Targeting," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 5-38.
    3. Anne-Marie Rieu-Foucault, 2018. "Les interventions de crise de la FED et de la BCE diffèrent-elles ?," Working Papers hal-04141702, HAL.
    4. Jakob Vestergaard & Daniela Gabor, 2021. "Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy," Working Papers Series inetwp170, Institute for New Economic Thinking.

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