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  3. Journal of Economic Perspectives
  4. Fall 1999
  5. On the Need for an International Lender of Last Resort

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

On the Need for an International Lender of Last Resort

  • Stanley Fischer
Journal of Economic Perspectives
vol. 13, no. 4, Fall 1999
(pp. 85–104)
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Abstract

Is there a useful function for an international lender of last resort (ILLR)--defined as crisis lender and crisis manager? Yes for international capital flows are excessively volatile and contagious, and because an ILLR can help mitigate the effects of this instability. I examine the Bagehot rules, and their applicability in an international context, focusing on the problem of moral hazard. I argue that a critical condition for the successful operation of an ILLR, a role that is to an important extent played by the IMF, is to ensure private sector involvement in the resolution of emerging market financial crises.

Citation

Fischer, Stanley. 1999. "On the Need for an International Lender of Last Resort." Journal of Economic Perspectives, 13 (4): 85–104. DOI: 10.1257/jep.13.4.85

JEL Classification

  • F34 International Lending and Debt Problems
  • O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
  • F33 International Monetary Arrangements and Institutions
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