Global Financial Safety Nets: Where do We go from Here?

39 Pages Posted: 8 Feb 2011

See all articles by Eduardo Fernandez-Arias

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB)

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2010

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 prequalification 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

JEL Classification: F33, F34, F42, F53

Suggested Citation

Fernandez-Arias, Eduardo and Levy-Yeyati, Eduardo Levy, Global Financial Safety Nets: Where do We go from Here? (November 1, 2010). IDB-WP 231, Available at SSRN: https://ssrn.com/abstract=1755756 or http://dx.doi.org/10.2139/ssrn.1755756

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
United States
202-623-3783 (Phone)
202-623-2481 (Fax)

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
56
Abstract Views
661
rank
270,444
PlumX Metrics