A Simple Model of An International Lender of Last Resort

Author/Editor:

Haizhou Huang ; C. A. E. Goodhart

Publication Date:

April 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper develops a simple model of an international lender of last resort (ILOLR). The world economy consists of many open economies, each with a banking system and a central bank operating under a pegged exchange rate regime. 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 with potential costs of international financial contagion. An ILOLR can play a useful role in providing international liquidity and reducing international contagion.

Series:

Working Paper No. 00/75

Subject:

English

Publication Date:

April 1, 2000

ISBN/ISSN:

9781451849721/1018-5941

Stock No:

WPIEA0752000

Format:

Paper

Pages:

13

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