search query: @author Parigi, B. M. / total: 2
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| Author: | Freixas, X. Parigi, B. M. Rochet, J.-C. |
| Title: | The lender of last resort: a twenty-first century approach |
| Journal: | Journal of the European Economic Association
2004 : DEC, VOL. 2:6, p. 1085-1115 |
| Index terms: | central banks economic shocks liquidity |
| Language: | eng |
| Abstract: | The classical Bagehot conception of a Lender of Last Resort (LOLR) that lends to illiquid banks has been criticized on two grounds: 1) the distinction between insolvency and illiquidity is not clear-cut, yet 2) a fully collateralized repo market allows central banks to provide the adequate aggregate amount of liquidity and and leave to the banks the responsibility of lending uncollateralized. This article analyzes these issues rigorously by providing a framework in which liquidity shocks cannot be distinquished from solvency ones and then asking whether there is a need for a LOLR and how it should operate in the absence of systemic threats. |
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