The international lender of last resort and selective bail-out

Cécile Bastidon (), Philippe Gilles and Nicolas Huchet ()

Emerging Markets Review, 2008, vol. 9, issue 2, 144-152

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

Date: 2008
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