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Global Financial Safety Nets: Where Do We Go from Here?

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  • Eduardo Fernández-Arias
  • Eduardo Levy-Yeyati

Abstract

From an emerging markets perspective, the global safety net remains full of holes despite recent stitches during the crisis. This paper proposes an effective and workable international lender-of-last-resort (ILLR) for systemic liquidity crises based on (i) an automatic trigger to access the facility; (ii) unilateral country pre-qualification to the facility during IMF Article IV consultations; and (iii) liquidity funded by the world's ‘issuers of last resort’. These principles support a reliable and broad-based ILLR without the carrying costs associated with inefficient reserve hoarding; one that would actually work as an effective preventive facility with minimal room for moral hazard.

Suggested Citation

  • Eduardo Fernández-Arias & Eduardo Levy-Yeyati, 2012. "Global Financial Safety Nets: Where Do We Go from Here?," International Finance, Wiley Blackwell, vol. 15(1), pages 37-68, April.
    • Handle: RePEc:bla:intfin:v:15:y:2012:i:1:p:37-68
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    File URL: https://hdl.handle.net/10.1111/j.1468-2362.2012.01295.x
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Último round para el prestamista internacional de última instancia (o la paradoja de la alerta temprana)
      by ELY in Blog de Eduardo Levy Yeyati on 2011-04-13 17:43:00

    Citations

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    Cited by:

    1. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.
    2. Daniel McDowell, 2017. "Need for speed: The lending responsiveness of the IMF," The Review of International Organizations, Springer, vol. 12(1), pages 39-73, March.
    3. Jenny Kilp & Vafa Anvari & Samantha Springfield & Crystal Roberts, 2018. "The Impact of the Global Financial Safety Net on Emerging Market Bond Spreads," Working Papers 8655, South African Reserve Bank.
    4. Scheubel, Beatrice & Stracca, Livio, 2019. "What do we know about the global financial safety net? A new comprehensive data set," Journal of International Money and Finance, Elsevier, vol. 99(C).
    5. Eduardo Levy Yeyati, 2019. "The Cost of Holding Foreign Exchange Reserves," CID Working Papers 353, Center for International Development at Harvard University.
    6. Habib, Maurizio Michael & Mileva, Elitza & Stracca, Livio, 2017. "The real exchange rate and economic growth: Revisiting the case using external instruments," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 386-398.
    7. Kawai, Masahiro, 2015. "International Spillovers of Monetary Policy: US Federal Reserve's Quantitative Easing and Bank of Japan's Quantitative and Qualitative Easing," ADBI Working Papers 512, Asian Development Bank Institute.
    8. Eduardo Levy-Yeyati & Juan Francisco Gómez, 2020. "The Cost of Holding Foreign Exchange Reserves," Springer Books, in: Jacob Bjorheim (ed.), Asset Management at Central Banks and Monetary Authorities, edition 1, chapter 0, pages 91-110, Springer.
    9. Essers, Dennis & Ide, Stefaan, 2019. "The IMF and precautionary lending: An empirical evaluation of the selectivity and effectiveness of the Flexible Credit Line," Journal of International Money and Finance, Elsevier, vol. 92(C), pages 25-61.
    10. Jenny Kilp & Vafa Anvari & Samantha Springfield & Crystal Roberts, 2019. "The Impact of the Global Financial Safety Net on Emerging Market Bond Spreads," Russian Journal of Money and Finance, Bank of Russia, vol. 78(2), pages 43-66, June.
    11. Stracca, Livio & Scheubel, Beatrice, 2016. "What do we know about the global financial safety net? Rationale, data and possible evolution," Occasional Paper Series 177, European Central Bank.
    12. Scheubel, Beatrice & Stracca, Livio & Tille, Cédric, 2019. "Taming the global financial cycle: What role for the global financial safety net?," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 160-182.

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    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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