On the Viability of an International Lender of Last Resort

Dr. Benedikt Zanker MSc

doi:10.5771/9783845201122

Summary

Over the last decade the global financial system has been shaken by financial crises in emerging economies all over the world. The result of these crises has been turmoil in financial markets, a severe deceleration of economic growth and hardship in the economies involved. The International Monetary Fund was quickly identified as a main culprit and has been the subject of intense debate ever since. While a consensus has developed that the Fund is in need of wide-ranging reforms, an agreement on which reform path to follow is still lacking. An often recurring proposal is to restructure the IMF into an international lender of last resort along the lines developed by Walter Bagehot, then editor of the Economist, in the late 19th century. Although this proposal appears initially suggestive, it has been frequently dismissed out of hand as unrealistic by policy makers as well as academics. The book analyses in detail whether this dismissal is founded or whether a rigourous reform along Bagehotian lines could indeed help to increase the stability of the global financial system.

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Bibliographic data

Edition: 1/2007
Copyright year: 2007
ISBN-Print: 978-3-8329-2568-0
ISBN-Online: 978-3-8452-0112-2
Publisher: Nomos, Baden-Baden
Series: Aktuelle Materialien zur Internationalen Politik
Volume: 73
Language: English
Pages: 374
Product type: Book Titles

Titelei/Inhaltsverzeichnis No access Pages 2 - 12 Benedikt Zanker
Acknowledgements No access Pages 13 - 14 Benedikt Zanker
1. Introduction No access Pages 15 - 20 Benedikt Zanker
2. 1. Regime Theory No access Pages 20 - 25 Benedikt Zanker
  2. Benedikt Zanker
    1. Global Public Goods No access Benedikt Zanker
    2. Moral Hazard Problems No access Benedikt Zanker
    3. Principal-Agent Problems No access Benedikt Zanker
  3. Benedikt Zanker
    1. The Efficient Markets Hypothesis No access Benedikt Zanker
    2. The Financial-Instability Hypothesis No access Benedikt Zanker
    3. Rational Herding No access Benedikt Zanker
3. Structure of the Analysis No access Pages 42 - 46 Benedikt Zanker
1. 1. Four Types of Currency Crises No access Pages 47 - 52 Benedikt Zanker
  2. The Problem of Contagion No access Pages 52 - 53 Benedikt Zanker
2. 1. First Generation Models No access Pages 53 - 56 Benedikt Zanker
  2. Second Generation Models No access Pages 56 - 58 Benedikt Zanker
  3. Benedikt Zanker
    1. Macroeconomic Feedback Models No access Benedikt Zanker
    2. Bank-run and Liquidity Models No access Benedikt Zanker
    3. Models of Expectations Formation and Herding Behaviour No access Benedikt Zanker
3. 1. Empirical Evidence No access Pages 62 - 63 Benedikt Zanker
  2. Evaluation No access Pages 63 - 66 Benedikt Zanker
  3. Lessons and Implications No access Pages 66 - 67 Benedikt Zanker
1. 1. Improved Transparency and Higher Regulatory Standards No access Pages 68 - 71 Benedikt Zanker
  2. An International Credit Insurance No access Pages 71 - 72 Benedikt Zanker
  3. The Tobin Tax No access Pages 72 - 74 Benedikt Zanker
  4. A Global Central Bank No access Pages 74 - 75 Benedikt Zanker
  5. A World Currency No access Pages 75 - 76 Benedikt Zanker
2. 1. A Sovereign Debt Restructuring Mechanism No access Pages 76 - 78 Benedikt Zanker
  2. The Calomiris Proposal No access Pages 78 - 80 Benedikt Zanker
  3. The Report by the Independent Task Force No access Pages 80 - 84 Benedikt Zanker
  4. The Meltzer Report No access Pages 84 - 86 Benedikt Zanker
  5. The Köhler Approach: Procedural Changes No access Pages 86 - 88 Benedikt Zanker
3. Conclusion No access Pages 88 - 89 Benedikt Zanker
1. Benedikt Zanker
  1. Enhancing Access to Foreign Currency No access Benedikt Zanker
2. 1. Benedikt Zanker
    1. Issues in Last Resort Lending No access Benedikt Zanker
    2. Individual Institutions versus the Monetary System No access Benedikt Zanker
    3. Contemporary Response No access Benedikt Zanker
  2. Benedikt Zanker
    1. Lending Freely No access Benedikt Zanker
    2. Penalty Rates No access Benedikt Zanker
    3. The Collateral No access Benedikt Zanker
    4. Financial Stability after 1866 No access Benedikt Zanker
3. 1. Theoretical Considerations No access Pages 104 - 107 Benedikt Zanker
  2. The Case for an International Lender of Last Resort No access Pages 107 - 109 Benedikt Zanker
  3. Fundamental Differences between International and Domestic Settings No access Pages 109 - 111 Benedikt Zanker
  4. The IMF as International Lender of Last Resort No access Pages 111 - 113 Benedikt Zanker
  5. The Fund’s Record as Crisis Manger No access Pages 113 - 116 Benedikt Zanker
1. 1. The Setting No access Pages 117 - 120 Benedikt Zanker
  2. The Run on Banks and Trust Companies No access Pages 120 - 121 Benedikt Zanker
  3. Pressure on Money, Stock and Call Loan Markets No access Pages 121 - 123 Benedikt Zanker
  4. Lessons of 1907 No access Pages 123 - 124 Benedikt Zanker
2. 1. The Setting No access Pages 124 - 125 Benedikt Zanker
  2. The Crisis No access Pages 125 - 128 Benedikt Zanker
  3. Lessons of the Sterling Crisis No access Pages 128 - 129 Benedikt Zanker
3. 1. The Mexican Peso Crisis No access Pages 129 - 131 Benedikt Zanker
  2. Benedikt Zanker
    1. Crisis in Thailand No access Benedikt Zanker
    2. Crisis in South Korea No access Benedikt Zanker
    3. Crisis in Indonesia No access Benedikt Zanker
  3. Benedikt Zanker
    1. The Rouble Crisis No access Benedikt Zanker
    2. Crisis in Brazil No access Benedikt Zanker
    3. Crisis in Argentina No access Benedikt Zanker
  4. Lessons from Emerging Market Crises No access Pages 143 - 145 Benedikt Zanker
1. Benedikt Zanker
  1. Current Funding Needs of the IMF No access Benedikt Zanker
2. 1. Lending-in-last-resort as Input in Monetary Policy No access Pages 153 - 157 Benedikt Zanker
  2. Lending-in-last-resort as Input in Banking Policy No access Pages 157 - 160 Benedikt Zanker
  3. Necessary Funding for an International Lender of Last Resort No access Pages 160 - 161 Benedikt Zanker
  4. Estimating Short-term External Obligations in the Developing World No access Pages 161 - 166 Benedikt Zanker
  5. Liquidity Gaps in the Past No access Pages 166 - 170 Benedikt Zanker
3. Conclusion and Implications No access Pages 170 - 172 Benedikt Zanker
1. The Concept of Collateral No access Pages 173 - 176 Benedikt Zanker
2. 1. Benedikt Zanker
    1. Argentina’s Contingent Repurchase Facility No access Benedikt Zanker
  2. Benedikt Zanker
    1. Privatisation in Latin America No access Benedikt Zanker
    2. Privatisation in East Asia No access Benedikt Zanker
    3. Privatisation in China No access Benedikt Zanker
    4. Privatisation in Russia No access Benedikt Zanker
  3. Benedikt Zanker
    1. Benedikt Zanker
      1. The US-Mexican Framework Agreement No access Benedikt Zanker
    2. Benedikt Zanker
      1. Telephone Receivables No access Benedikt Zanker
      2. Workers’ Remittances No access Benedikt Zanker
      3. Credit Card Receivables No access Benedikt Zanker
      4. Taxing Export Earnings No access Benedikt Zanker
3. Problems Arising from the Imposition of Strict Collateral Requirements No access Pages 199 - 201 Benedikt Zanker
4. Implications for the Viability of an International Lender of Last Resort No access Pages 201 - 202 Benedikt Zanker
1. Advantages of Pre-qualification No access Pages 203 - 206 Benedikt Zanker
2. 1. Transparency Criteria No access Pages 206 - 211 Benedikt Zanker
  2. Benedikt Zanker
    1. Capital Adequacy Requirements No access Benedikt Zanker
    2. Minimum Reserve Requirements No access Benedikt Zanker
    3. Internationalisation of the Financial Sector No access Benedikt Zanker
    4. Deposit Insurance No access Benedikt Zanker
  3. Benedikt Zanker
    1. Solvency Ratios No access Benedikt Zanker
    2. Liquidity Ratios No access Benedikt Zanker
3. Conclusion: Pre-qualification Is the Way Forward No access Pages 228 - 229 Benedikt Zanker
1. IMF Induced Moral Hazard No access Pages 230 - 233 Benedikt Zanker
2. 1. Evidence on Creditor-side Moral Hazard No access Pages 233 - 241 Benedikt Zanker
  2. Evidence on Debtor-side Moral Hazard No access Pages 241 - 244 Benedikt Zanker
3. Benedikt Zanker
  1. Empirical Evidence on Catalytic Finance No access Benedikt Zanker
4. Instruments Mitigating Moral Hazard Problems No access Pages 249 - 252 Benedikt Zanker
1. 1. Interests of Borrowing Countries No access Pages 253 - 255 Benedikt Zanker
  2. Interests of International Investors No access Pages 255 - 255 Benedikt Zanker
  3. Benedikt Zanker
    1. Foreign Policy Objectives No access Benedikt Zanker
    2. Financial Sector Interests No access Benedikt Zanker
    3. Creditor Country Costs No access Benedikt Zanker
  4. Evidence on IMF Lending Arrangements No access Pages 259 - 260 Benedikt Zanker
2. 1. IMF Voting Weights No access Pages 260 - 264 Benedikt Zanker
  2. Benedikt Zanker
    1. Voting Power at the Board of Governors No access Benedikt Zanker
    2. Voting Power at the Executive Board No access Benedikt Zanker
    3. Constituencies at the Executive Board No access Benedikt Zanker
    4. The Power of Industrialised and Developing Countries at the IMF No access Benedikt Zanker
3. 1. Governance Reform Proposals No access Pages 275 - 279 Benedikt Zanker
  2. Political Difficulties No access Pages 279 - 281 Benedikt Zanker
  3. Governance Reform and Pre-qualification No access Pages 281 - 282 Benedikt Zanker
1. 1. New Money Approach No access Pages 283 - 286 Benedikt Zanker
  2. The Brady Plan No access Pages 286 - 287 Benedikt Zanker
2. 1. Successful Restructurings No access Pages 287 - 290 Benedikt Zanker
  2. Problems due to Renegade Creditors No access Pages 290 - 293 Benedikt Zanker
  3. Need for Reform No access Pages 293 - 294 Benedikt Zanker
3. 1. A Code of Good Conduct No access Pages 294 - 297 Benedikt Zanker
  2. Collective Action Clauses No access Pages 297 - 300 Benedikt Zanker
  3. A Sovereign Debt Restructuring Mechanism No access Pages 300 - 303 Benedikt Zanker
4. 1. Concerns on the Effectiveness of Collective Action Clauses No access Pages 303 - 309 Benedikt Zanker
  2. Market-based Approach as the Way Forward No access Pages 309 - 310 Benedikt Zanker
1. 1. Principles for Effective Liquidity Assistance No access Pages 311 - 313 Benedikt Zanker
  2. Principles for Effective Monitoring and Supervisory Work No access Pages 313 - 315 Benedikt Zanker
2. 1. General Membership No access Pages 315 - 317 Benedikt Zanker
  2. Benedikt Zanker
    1. Sovereign Stability Criteria No access Benedikt Zanker
    2. Criteria Indicating Financial Sector Stability No access Benedikt Zanker
3. 1. Lending Rules Governing PRGF and SBA Facilities No access Pages 322 - 323 Benedikt Zanker
  2. Benedikt Zanker
    1. Ensuring Liquidity Assistance in Sufficient Amounts No access Benedikt Zanker
    2. Ensuring Liquidity Assistance Is Employed Effectively No access Benedikt Zanker
    3. Reigning In on Debtor-side Moral Hazard No access Benedikt Zanker
4. 1. Funding Issues No access Pages 327 - 328 Benedikt Zanker
  2. Transition Period No access Pages 328 - 330 Benedikt Zanker
1. 1. Opposition by Developed Countries and the G-7 No access Pages 331 - 336 Benedikt Zanker
  2. The Lacking Clout of Developing Economies No access Pages 336 - 337 Benedikt Zanker
2. 1. Regional Monetary Cooperation No access Pages 337 - 341 Benedikt Zanker
  2. Changes Inside the IMF No access Pages 341 - 344 Benedikt Zanker
Appendix No access Pages 345 - 345 Benedikt Zanker
Abbreviations No access Pages 345 - 346 Benedikt Zanker
Bibliography No access Pages 347 - 374 Benedikt Zanker