Journal of Economic Perspectives: Vol. 13 No. 4 (Fall 1999)


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On the Need for an International Lender of Last Resort

Article 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


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.

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Fischer, Stanley (IMF)

JEL Classifications

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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