Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26331
Authors: 
Freixas, Xavier
Parigi, Bruno Maria
Year of Publication: 
2008
Series/Report no.: 
CESifo working paper 2286
Abstract: 
During the last decades a consensus has emerged that it is impossible to disentangle liquidity shocks from solvency shocks. As a consequence the classical lender of last resort rules, as defined by Thornton and Bagehot, based on lending to solvent illiquid institutions appear ill-suited to this environment. We summarize here the main contributions that have developed considering this new paradigm and discuss how institutional features relating to bank closure policy influences lender of last resort and other safety net issues. We devote particular emphasis to the analysis of systemic risk and contagion in banking and the role of the lender of last resort to prevent it.
Subjects: 
lender of last resort
systemic risk
contagion
bank closure
liquidity
discount window
JEL: 
E58
Document Type: 
Working Paper

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