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The financial structure changes and the central bank policy

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  • Laurent Le Maux

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a response to the financial collapse of 2007–2009, central banks overstepped their narrow role of lender of last resort (LLR) and acted as dealers or market-makers of last resort (MMLR). Such an evolution of the central bank policy stems from the endogenous process of growing securities markets, financial innovations, and market-based credit intermediation. This article examines how changes in the structure of the banking and financial system transforms the central bank policy in financial stability. It considers the separation or integration of the LLR and MMLR functions, revisits the debate opposing lend-to-market and lend-to-institution theses, and discusses the LLR standard rule and its transposition to the MMLR rule. Inasmuch as private securities markets and financial innovations determine the structure of the credit system, central banks endogenously adopt the integrated approach, so that the extensive LLR policy prevails.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Laurent Le Maux, 2017. "The financial structure changes and the central bank policy," Post-Print hal-01657569, HAL.
    • Handle: RePEc:hal:journl:hal-01657569
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    Cited by:

    1. Emmanuel Carré & Laurent Le Maux, 2018. "Globalisation financière et Dollar Swap Lines : la Réserve fédérale et la Banque centrale européenne durant la crise de 2007-2009," CEPN Working Papers hal-01933930, HAL.
    2. Emmanuel Carré & Laurent Le Maux, 2018. "The Federal Reserve's Dollar Swap Lines and the European Central Bank during the global financial crisis of 2007-2009," Post-Print hal-02570211, HAL.
    3. Jakob Vestergaard & Daniela Gabor, 2021. "Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy," Working Papers Series inetwp170, Institute for New Economic Thinking.

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