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A Selective Bail-Out International Lending of Last Resort Model

Author

Listed:
  • Cecile Bastidon

    (Departement Finance, LEAD, Universite du Sud)

  • Philippe Gilles

    (Departement Finance, LEAD, Universite du Sud)

  • Nicolas Huchet

    (Departement Finance, LEAD, Universite du Sud
    CEFI, Universite de la Mediterranee)

Abstract

In the event of third generation crisis, international lending of last resort should be used if and only if the ILLOR is informed on the subject of financial and banking domestic markets. Therefore, if will act at a macroeconomic level, as a usual ILLOR, but also at a microeconomic level, since there will be selective lending to commercial banks. Our model shows that there are two conditions of optimality of this intervention: first, the country should be eligible; second, only solvent banks should be bailed out.

Suggested Citation

  • Cecile Bastidon & Philippe Gilles & Nicolas Huchet, 2008. "A Selective Bail-Out International Lending of Last Resort Model," Annals of Economics and Finance, Society for AEF, vol. 9(1), pages 103-114, May.
    • Handle: RePEc:cuf:journl:y:2008:v:9:i:1:p:103-114
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Lender of last resort; Capital account crises; Systematic risk; Financial stability; Inter-Bank market;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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