The lender of last resort: a 21st century approach
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4 Non-technical summary 5
منابع مشابه
THE LENDER OF LAST RESORT: A 21st CENTURY APPROACH
The classical Bagehot’s conception of a Lender of Last Resort (LOLR) that lends to illiquid banks has been criticized on two grounds: on the one hand, the distinction between insolvency and illiquidity is not clear cut; on the other a fully collateralized repo market allows Central Banks to provide the adequate aggregated amount of liquidity and leave the responsibility of lending uncollaterali...
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The classical doctrine of the Lender of Last Resort, elaborated by Bagehot (1873), asserts that the central bank should lend to “illiquid but solvent” banks under certain conditions. Several authors have argued that this view is now obsolete: when interbank markets are efficient, a solvent bank cannot be illiquid. This paper provides a possible theoretical foundation for rescuing Bagehot’s view...
متن کاملLender of Last Resort :
It has become commonplace in the current crisis to refer to the Federal Reserve as the economy’s lender of last resort (LLR). Typical is the observation of Glenn Hubbard, Hal Scott, and John Thornton (2009) that “Over many decades and especially in this financial crisis, the Fed has used its balance sheet to be a classical lender of last resort.” With all due respect to these authors and numero...
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The joint existence of a lender of last resort and of a stock market is usually considered the sign of a developed financial infrastructure. This paper analyzes whether a securities market may play a role similar to that of a lender of last resort by being of assistance to a bank, which faces possible liquidity shortages. We examine which of these two institutions best prevents a bank’s liquidi...
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The concept of a lender of last resort (LLR) stems from a central banking principle dating back to Bagehot more than a century ago. The principle holds that in a financial panic, the central bank should stand ready "to lend freely...whenever the security is good" (Bagehot 1873, 48, 51). This precept implies that in a financial crisis there is a multipleequilibrium situation, and that the good o...
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