The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank. The authors acknowledge comments received by Guillermo Calvo, Steven Kamin, Nicolás Eyzaguirre and participants in the IDB/Brookings conference ‘Latin America's Economic Future: Prospects and Challenges’, as well policy makers participating in the meetings of the IDB Latin America and the Caribbean (LAC) /G-20 Initiative. We are grateful to Jorge Pérez, Tomás Williams and Mariana Barrera for outstanding research assistance.
Global Financial Safety Nets: Where Do We Go from Here?†
Article first published online: 22 APR 2012
© 2012 Blackwell Publishing Ltd
Volume 15, Issue 1, pages 37–68, Spring 2012
How to Cite
Fernández-Arias, E. and Levy-Yeyati, E. (2012), Global Financial Safety Nets: Where Do We Go from Here?. International Finance, 15: 37–68. doi: 10.1111/j.1468-2362.2012.01295.x
- Issue published online: 22 APR 2012
- Article first published online: 22 APR 2012
From an emerging markets perspective, the global safety net remains full of holes despite recent stitches during the crisis. This paper proposes an effective and workable international lender-of-last-resort (ILLR) for systemic liquidity crises based on (i) an automatic trigger to access the facility; (ii) unilateral country pre-qualification to the facility during IMF Article IV consultations; and (iii) liquidity funded by the world's ‘issuers of last resort’. These principles support a reliable and broad-based ILLR without the carrying costs associated with inefficient reserve hoarding; one that would actually work as an effective preventive facility with minimal room for moral hazard.