| Title |
A quantitative model of international lending of last resort |
| ID_Doc |
70575 |
| Authors |
Gete, P; Melkadze, G |
| Title |
A quantitative model of international lending of last resort |
| Year |
2020 |
| Published |
|
| DOI |
10.1016/j.jinteco.2020.103290 |
| Abstract |
We analyze banking crises and lending of last resort (LOLR) in a quantitative model of financial frictions with bank defaults. LOLR policies generate a tradeoff between financial fragility (due to more highly leveraged banks) and milder crises since the policies are effective once in a crisis. In the calibrated model, the crisis mitigation effect dominates the moral hazard problem and the economy is better off having access to a lender of last resort. We characterize the conditions under which pools of small economies can be sustainable LOLRs. In addition, we assess the ability of China - a country with ample reserves - to be a sustainable international LOLR. (C) 2020 Published by Elsevier B.V. |
| Author Keywords |
Banking crises; China; Financial frictions; Lender of last resort |
| Index Keywords |
Index Keywords |
| Document Type |
Other |
| Open Access |
Open Access |
| Source |
Social Science Citation Index (SSCI) |
| EID |
WOS:000528047200003 |
| WoS Category |
Economics |
| Research Area |
Business & Economics |
| PDF |
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