Can Emerging Economy Central Banks Be Market-Makers of Last Resort?
3 Pages Posted: 8 Oct 2014
Date Written: September 2014
Market-maker of last resort (MMLR) is not an extension of the lender of last resort (LOLR) function; it is a completely new role for the central bank. The implicit model behind the classical LOLR function is that credit markets are driven by trust in solvency of banks and non-bank intermediaries. When that trust evaporates, the central bank can step in and save the day. In some long-departed monetary system, this may have been the whole story.
Full publication: Re-Thinking the Lender of Last Resort
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