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Global Financial Safety Nets: Where Do We Go from Here?

  • Eduardo Fernández Arias
  • Eduardo Levy-Yeyati

An analysis of the performance of the global financial safety net during the 2008-2009 crisis, and an evaluation of its new components, indicates that, from an emerging markets perspective, the net remains full of holes despite recent stitches. This paper therefore proposes an effective and workable international lender of last resort (ILLR) for systemic liquidity crises based on: i) an automatic trigger to access the facility; ii) unilateral country prequalification to the facility during Article IV consultations; and iii) liquidity funded by the world’s “issuers of last resort.” These principles would support a reliable and broad-based ILLR without the carrying costs associated with inefficient reserve hoarding, which would actually work as an effective preventive facility with minimal room for moral hazard.

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File URL: http://www.utdt.edu/download.php?fname=_129736534102470200.pdf
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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number 2010-06.

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Length: 37 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:udt:wpbsdt:2010-06
Contact details of provider: Postal: Miñones 2177 - (1428) Buenos Aires
Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994

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  1. Chami Ralph & Hakura Dalia S. & Montiel Peter J., 2012. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Journal of Globalization and Development, De Gruyter, vol. 3(1), pages 1-25, June.
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