A Simple Model of an International Lender of Last Resort

Haizhou Huang () and Charles Goodhart ()

FMG Discussion Papers from Financial Markets Group

Abstract: This paper develops a simple model of an international lender of last resort (ILOLR). The World economy consists of many open economies, each with its own banking system and its own central bank which uses its reserves to manage a pegged exchange rate. The fragility of the banking system and the limited ability of a domestic cent-rate. The fragility of the banking system and the limited ability of a domestic central bank to provide international liquidity together can cause currency and banking crises.. An international interbank market can help an economy with the needed international liquidity, but this risk-sharing also comes with potential costs of international financial contagion. Such international contagious risk is much higher when there is an international interbank market than otherwise. An ILOLR can play a useful role in providing international liquidity and reducing international contagion.

Date: 1999-09
References: Add references at CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp336.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp336

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().