A Selective Bail-Out International Lending of Last Resort Model

Cécile Bastidon (), Philippe Gilles and Nicolas Huchet ()
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Philippe Gilles: Departement Finance, LEAD, Universite du Sud

Annals of Economics and Finance, 2008, vol. 9, issue 1, 103-114

Abstract: In the event of third generation crisis, international lending of last resort should be used if and only if the ILLOR is informed on the subject of financial and banking domestic markets. Therefore, if will act at a macroeconomic level, as a usual ILLOR, but also at a microeconomic level, since there will be selective lending to commercial banks. Our model shows that there are two conditions of optimality of this intervention: first, the country should be eligible; second, only solvent banks should be bailed out.

Keywords: Lender of last resort; Capital account crises; Systematic risk; Financial stability; Inter-Bank market (search for similar items in EconPapers)
JEL-codes: C15 C81 E44 F33 F34 G21 N20 (search for similar items in EconPapers)
Date: 2008
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Working Paper: A selective bail-out international lending of last resort model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2008:v:9:i:1:p:103-114

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