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Implementing an International Lender of Last Resort

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  • Knedlik, Tobias

Abstract

Current research discusses various general frameworks for installing an international lender of last resort (ILOLR). However, it remains unclear how the ILOLR should actually operate. This paper discusses six different options of construction of an ILOLR who supports central banks in the case of currency crises. The paper concludes that the cost efficient version of the ILOLR would be direct interventions by the IMF by the use of IMF resources and the right to dispose additional reserves from central banks. The paper considers measures of cost efficiency, such as cost of borrowing, intervention, and sterilization and moral hazard problems.

Suggested Citation

  • Knedlik, Tobias, 2006. "Implementing an International Lender of Last Resort," IWH Discussion Papers 20/2006, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhdps:iwh-20-06
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    File URL: https://www.econstor.eu/bitstream/10419/23765/1/20-06.pdf
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    References listed on IDEAS

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    1. Haizhou Huang & Shang-Jin Wei, 2003. "Monetary Policies for Developing Countries; The Role of Corruption," IMF Working Papers 03/183, International Monetary Fund.
    2. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    5. Corsetti, Giancarlo & Guimaraes, Bernardo & Roubini, Nouriel, 2006. "International lending of last resort and moral hazard: A model of IMF's catalytic finance," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 441-471, April.
    6. P. Burger & T. Knedlik, 2004. "The Mci As A Monetary Policy Guide In A Small, Open Emerging Market Economy," South African Journal of Economics, Economic Society of South Africa, vol. 72(2), pages 365-383, June.
    7. Stanley Fischer, 2002. "Financial Crises and Reform of the International Financial System," NBER Working Papers 9297, National Bureau of Economic Research, Inc.
    8. Robert A. Mundell, 1983. "International Monetary Options," Cato Journal, Cato Journal, Cato Institute, vol. 3(1), pages 189-210, Spring.
    9. International Monetary Fund, 2002. "Financial Crises, Poverty, and Income Distribution," IMF Working Papers 02/4, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    International-Lender-of-Last-Resort; Internationaler Währungsfonds; Währungskrisen; International Lender of Last Resort; International Monetary Fund; currency crises;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F02 - International Economics - - General - - - International Economic Order and Integration

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