Chapter

The International Lender of Last Resort

Edited by Olivier Jeanne and Charles Wyplosz

in Managing Currency Crises in Emerging Markets

Published by University of Chicago Press

Published in print February 2003 | ISBN: 9780226155401
Published online February 2013 | e-ISBN: 9780226155425 | DOI: http://dx.doi.org/10.7208/chicago/9780226155425.003.0006
The International Lender of Last Resort

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This chapter examines whether an international lender of last resort (ILOLR) would be a useful addition to the international financial architecture. It analyzes whether an ILOLR can function effectively as a fund with limited and predetermined resources using a model of an emerging economy vulnerable to international liquidity crises. The findings reveal that required size of the ILOLR depends on how its resources are used by the domestic authorities. This chapter explains that if the LOLR backs a guarantee of the foreign currency liabilities of domestic banks, its resources do not need to be larger than the liquidity gap in the domestic banking sector.

Keywords: ILOLR; international financial architecture; emerging economy; liquidity crises; domestic banks; liquidity gap

Chapter.  15063 words.  Illustrated.

Subjects: International Economics

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