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Title:Lender of last report in a transitional economy with a fixed exchange rate: Financial crises and monetary policy in Sweden under the silver and gold standards, 1834 - 1913 PDF Logo
Authors:Ögren, Anders
Issue Date:2003
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 537
Abstract:According to the classical view, an economy's lender of last resort should be its central bank. For brief periods of time, the bank might suspend convertibility in order to provide the liquidity needed to support the domestic credit market. Recent experience of financial crises demonstrates the conflict between maintaining a fixed exchange rate and serving as a lender of last resort. The lesson of Sweden's history of crises under the classical specie standard is that a transitional, capital importing economy has to pay closer attention to the specie standard rules than do capital exporting economies. While the Swedish central bank, for a limited time, could support the credit market within the limits of the specie standard, if the crises persisted support mechanisms other than abandoning convertibility were required. The solution adopted was to import high powered money through loans guaranteed by the Swedish State.
Subjects:Classical silver and gold standards
Financial Crises
Fractional Reserves
Lender of Last Resort
Monetary Policy
JEL:E42
E58
N13
N23
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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