Monetary Stability and Liquidity Crises: The Role of the Lender of Last Resort

We evaluate the desirability of having an elastic currency generated by a lender of last resort that prints money and lends it to banks in distress. When banks cannot borrow, the economy has a unique equilibrium that is not Pareto optimal. The introduction of unlimited borrowing at a zero nominal in...

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Veröffentlicht in:	Journal of economic theory 2001-07, Vol.99 (1-2), p.187-219
Hauptverfasser:	Antinolfi, Gaetano, Huybens, Elisabeth, Keister, Todd
Format:	Artikel
Sprache:	eng
Schlagworte:	banking crises Borrowing Currencies discount window policy Economic theory elastic currency Equilibrium inflation Interest rates lender of last resort liquidity crises Monetary theory multiple equilibria Pareto optimum Studies
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