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

Eduardo Fernandez-Arias and Eduardo Levy Yeyati

No 3166, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: An analysis of the performance of the global financial safety net during the 2008-2009 crisis, and an evaluation of its new components, indicates that, from an emerging markets perspective, the net remains full of holes despite recent stitches. This paper therefore 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 Article IV consultations; and iii) liquidity funded by the world's "issuers of last resort". These principles would support a reliable and broad-based ILLR without the carrying costs associated with inefficient reserve hoarding, which would actually work as an effective preventive facility with minimal room for moral hazard.

Keywords: Liquidity Crisis; International Lender of Last Resort; Safety Net (search for similar items in EconPapers)
JEL-codes: F33 F34 F42 F53 (search for similar items in EconPapers)
Date: 2010-11
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Global Financial Safety Nets: Where Do We Go from Here? (2012)
Working Paper: Global Financial Safety Nets: Where Do We Go from Here? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:3166

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