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

Eduardo Fernandez-Arias and Eduardo Levy-Yeyati
Authors registered in the RePEc Author Service: Eduardo Levy Yeyati

International Finance, 2012, vol. 15, issue 1, 37-68

Abstract: From an emerging markets perspective, the global safety net remains full of holes despite recent stitches during the crisis. This paper 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 pre-qualification to the facility during IMF Article IV consultations; and (iii) liquidity funded by the world's ‘issuers of last resort’. These principles support a reliable and broad-based ILLR without the carrying costs associated with inefficient reserve hoarding; one that would actually work as an effective preventive facility with minimal room for moral hazard.

Date: 2012
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Working Paper: Global Financial Safety Nets: Where Do We Go from Here? (2010)
Working Paper: Global Financial Safety Nets: Where Do We Go from Here? (2010)
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