Lender of Last Resort: Actions, Results and Lessons from Mexico's Experience During the Crisis

9 Pages Posted: 8 Oct 2014

Date Written: September 2014

Abstract

The note describes the process of contagion from the International Financial turmoil to domestic markets, the transmission mechanism through the FX market, and how the high volatility of the foreign exchange rate became a risk to financial stability. It explains the dependency of the Mexican financial system on the ability of markets to work without disruption. The main actions taken by policy makers to restore stability to the system are outlined and reviewed. The last section provides the author’s assessment of the effectiveness of the different actions taken, the tools used and lessons learned.

Full publication: Re-Thinking the Lender of Last Resort

Keywords: Foreign exchange rate, interbank lending, liquidity, systemic risk, central bank interventions, FX swaps, lender of last resort

JEL Classification: E58, F42

Suggested Citation

Sidaoui, José, Lender of Last Resort: Actions, Results and Lessons from Mexico's Experience During the Crisis (September 2014). BIS Paper No. 79g. Available at SSRN: https://ssrn.com/abstract=2504709

José Sidaoui (Contact Author)

Bank of Mexico

Av. 5 de Mayo 18
Piso 4
Mexico City, 06059
Mexico

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