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The International Lender of Last Resort: How Large is Large Enought?

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  • Mr. Olivier D Jeanne

Abstract

This paper considers how an international lender of last resort (LOLR) can prevent self-fulfilling banking and currency crises in emerging economies. We compare two different arrangements: one in which the international LOLR injects liquidity into international financial markets, and one in which its resources are used to back domestic banking safety nets. Both arrangements would require important changes in the global financial architecture: the first one would require a global central bank issuing an international currency, while the second one would have to be operated by an "international banking fund" closely involved in the supervision of domestic banking systems.

Suggested Citation

  • Mr. Olivier D Jeanne, 2001. "The International Lender of Last Resort: How Large is Large Enought?," IMF Working Papers 2001/076, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/076
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    More about this item

    Keywords

    WP; interest rate; central bank; banking sector; credit crunch; lender of last resort; bank runs; multiple equilibria; exchange rate regime; dollarization; deposit insurance; Asian crisis; bank assets; bank collapse; international LOLR; bank run; currency depreciation; discount window; currency risk; banks' assets; solvency of bank; bank's depositor; domestic bank; Currencies; Exchange rates; Bank solvency; Currency mismatches; Global;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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