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

2001 ◽  
Vol 99 (1-2) ◽  
pp. 187-219 ◽  
Author(s):  
Gaetano Antinolfi ◽  
Elisabeth Huybens ◽  
Todd Keister
Keyword(s):  
Lender Of Last Resort ◽  
Monetary Stability ◽  
Liquidity Crises

The Position Of The Bank Indonesia As The Lender Of Last Resort After The Enactment Of Law No. 9 Of 2016 On Prevention And Mitigation Of Financial System Crisis

2017 ◽  
Vol 5 (4) ◽  
pp. 08-11
Author(s):  
Theresia Anita Christiani
Keyword(s):  
Data Analysis ◽  
Central Bank ◽  
Financial Services ◽  
Qualitative Data ◽  
Secondary Data ◽  
Jel Classification ◽  
Lender Of Last Resort ◽  
Short Term ◽  
Paper Review

Objective - This paper explores the role of the Indonesian Central Bank as the Lender of the Last Resort. Methodology/Technique - This research uses normative juridical research and secondary data. Findings - The results indicate that the Bank of Indonesian, in coordination with the Financial Services Authority, still has the authority to grant short-term loans for banks with liquidity issues. Nevertheless, the Bank of Indonesia does not have authority to provide emergency finance facilities where the funding is granted at the government's expense. Novelty - This paper uses normative juridical research and qualitative data analysis. Type of Paper - Review. Keywords: Authority, Bank, Crises, Position, Prevention, Indonesia. JEL Classification: K10, K20.

Emergency Politics in the Euro Crisis

2019 ◽  
pp. 117-151 ◽  
Author(s):  
Christian Kreuder-Sonnen
Keyword(s):  
Securities Markets ◽  
Euro Crisis ◽  
Lender Of Last Resort ◽  
Member States ◽  
Institutional Power ◽  
European Central ◽  
Societal Actors ◽  
Emergency Measures ◽  
Economic Policymaking

Chapter 5 starts with an analysis of the establishment and normalization of the European “bailout regime” in the Euro crisis. In 2010, member states of the Eurogroup and EU institutions devised exceptional emergency credit facilities and created the so-called troika to devise and implement harsh austerity measures in recipient states. A combination of rhetorical and institutional power advantages for the authority-holders explains why the regime was ratcheted up despite the widespread resistance of societal actors. Second, the chapter analyzes the European Central Bank’s (ECB) adoption of the role of a lender of last resort to sovereigns of the Eurozone. With the Securities Markets Programme in 2010, the ECB circumvented the monetary financing prohibition and began to intervene in the fiscal and economic policymaking of recipient states. While the Bank’s emergency measures were highly contentious, it successfully deployed arguments of necessity and functionality to stabilize and even ramp up its powers.

Qard-al-Hasan-based monetary policy and the role of the central bank as the lender of last resort

2020 ◽  
Vol 11 (2) ◽  
pp. 326-345 ◽  
Author(s):  
Mohammad Selim ◽  
M. Kabir Hassan
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Design Methodology ◽  
Equal Opportunities ◽  
Lender Of Last Resort ◽  
Content Type ◽  
Playing Field ◽  
Fair Competition ◽  
Real Gdp

Purpose This paper aims to examine how a central bank (CB) can act as a lender of last resort (LOLR) for both Islamic and conventional interest-based banks by pursuing a Qard-al-Hasan (QH)-based monetary policy (MP). Design/methodology/approach The role of the CB as LOLR under QH-based MP and its effects on major macroeconomic variables, including deposits, loan creation and aggregate expenditures, are examined on theoretical grounds by using the aggregate output and aggregate expenditure model under the framework of Islamic MP. Findings When the CB acts as LOLR by pursuing QH-based MP, it automatically empowers Islamic banks (IBs) by providing access to borrowing funds from the CB on a QH basis. As a result, IBs will not be required to hold billions of dollars as liquid assets against liquidity risks. Thus, the lending capacity of IBs will increase and deposit expansion, loan creation and aggregate expenditures in the economy will all expand. This will in turn increase real GDP and employment while reducing the unemployment rate. Originality/value This is the first paper to analyze CBs acting as LOLR for both IBs and conventional interest-based banks by pursuing a QH-based MP, thus providing equal opportunities and equal access to borrowing facilities from the CB, along with equal partnership and fair competition for all and absolutely no discrimination to anyone. The LOLR service to all banks under QH-based MP will unveil a new horizon of opportunities where all financial institutions are expected to thrive. IBs will escape the constraints of the constant fear of liquidity risks and find a level-playing field.

Can Liquidity Risk Explain Diseconomies of Scale in Hedge Funds?

2017 ◽  
Vol 07 (02) ◽  
pp. 1750002
Author(s):  
Hany A. Shawky ◽  
Ying Wang
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Fund Performance ◽  
Diseconomies Of Scale ◽  
Liquidity Crises ◽  
Using Data ◽  
Asset Size ◽  
Hedge Fund Performance

Using data from the Lipper TASS hedge fund database over the period 1994–2012, we examine the role of liquidity risk in explaining the relation between asset size and hedge fund performance. While a significant negative size-performance relation exists for all hedge funds, once we stratify our sample by liquidity risk, we find that such a relationship only exists among funds with the highest liquidity risk. Liquidity risk is found to be another important source of diseconomies of scale in the hedge fund industry. Evidently, for high liquidity risk funds, large funds are less able to recover from the relatively more significant losses incurred during market-wide liquidity crises, resulting in lower performance for large funds relative to small funds.

scholarly journals THE ROLE OF THE INVESTMENT ACTIVITY OF CENTRAL BANKS IN THE NATIONAL ECONOMY

2017 ◽  
Vol 2017 (1) ◽  
pp. 63-70
Author(s):  
Елена Федулова ◽  
Elena Fedulova ◽  
Светлана Кононова ◽  
Svetlana Kononova ◽  
Александр Матросов ◽  
...  
Keyword(s):  
Central Bank ◽  
National Economy ◽  
Foreign Exchange Market ◽  
Central Banks ◽  
Lender Of Last Resort ◽  
Investment Activity ◽  
State Of The Economy ◽  
General Scientific ◽  
Currency Intervention

Subject. The article is devoted to the implementation of investment activities of central banks. Goal and objectives. The article reveals the content and gives a comparative analysis of the investment activity of central banks in the different countries of the world. It defines the role of the central bank and its status in the country's financial and economic policy. Methodology. The methodological basis of the research is the general scientific method of cognition, as well as comparative, systemic and logical-structural analysis. Results. The analysis allowed the authors to structure the investment activity of central banks and to explain its individual components. The article gives a detailed analysis of motives for conducting currency intervention, instruments of investing in the foreign exchange market, as well as the role of the central bank as a lender of last resort and the crisis state of the economy as an impetus to the development of refinancing of credit institutions. It reviews various methods of refinancing and the effectiveness of their application in various economic conditions. Conclusions and significance. The research has allowed the authors to identify new tendencies, features and some contradictions of investment activity of central banks in the national economy.

scholarly journals The Central Bank as Lender of Last Resort

2021 ◽  
pp. 79-100
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Central Bank ◽  
Lender Of Last Resort ◽  
Fire Sales ◽  
Bank Run ◽  
Trade Offs ◽  
Model Variant ◽  
Control Framework ◽  
Asset Liquidity

AbstractIn this chapter we review the function of the central bank as lender of last resort (LOLR), starting from the understanding of financial crises developed in the previous chapter. We recall long-established LOLR principles: proactive lending, inertia of the central bank risk control framework, and risk endogeneity. Because of its systemic role, a central bank should not tighten its collateral framework in a crisis, as restrictive policies are likely to not only increase the overall damage done by a crisis to society, but to even increase central bank losses. We explain in more detail the main reasons why a central bank should act as LOLR: prevent negative externalities from fire sales; its unique status as institution with unlimited liquidity; its status as a risk-free counterparty making others accept to deliver collateral to it even at high haircuts; and its mandate to preserve price stability. We distinguish three different forms of LOLR: elements built into the regular operational framework; readiness to relax parameters in a crisis; and provision of emergency liquidity assistance to individual firms. We then discuss what could be the optimal propensity of a central bank to engage in LOLR activities and outline possible trade-offs. Last but not least, we develop a bank-run model which highlights the role of asset liquidity and central bank eligible collateral. We calculate through a model variant with binary asset liquidity and uniform central bank collateral haircut, but then also introduce a model variant with continuous asset liquidity and haircuts.

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