Is There a Need for an International Lender of Last Resort?

Countries need a central bank to fill the limited role of a lender of last resort (LOLR) in a financial panic. Central banks have no special function when a financial crisis occurs. Other agencies must then take charge. The IMF has neither attribute of a LOLR - power to create unlimited amounts of high-powered money and independent authority to exercise that power. It is not needed if many countries experience a financial panic - each of them has a central bank. If many countries face financial crises, each of them has to reconstruct the broken elements of its financial system, whether domestic institutions or negotiations with foreign lenders. If they need to borrow abroad, they will find private sector lenders in international capital markets if they will pay a penalty rate an offer good collateral.