Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19506
Authors: 
Fecht, Falko
Tyrell, Marcel
Year of Publication: 
2004
Series/Report no.: 
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,39
Abstract: 
In a framework closely related to Diamond and Rajan (2001) we characterize different financial systems and analyze the welfare implications of different LOLR-policies in these financial systems. We show that in a bank-dominated financial system it is less likely that a LOLR-policy that follows the Bagehot rules is preferable. In financial systems with rather illiquid assets a discretionary individual liquidity assistance might be welfare improving, while in market-based financial systems, with rather liquid assets in the banks' balance sheets, emergency liquidity assistance provided freely to the market at a penalty rate is likely to be efficient. Thus, a "one size fits all"-approach that does not take the differences of financial systems into account is misguiding.
Subjects: 
Financial Crises
Lender of Last Resort
Comparing Financial Systems
JEL: 
D52
E44
G21
E52
E58
Document Type: 
Working Paper

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