Working paper
Open access

The International Lender of Last Resort Between Scylla and Charybdis

Number of pages26
PublisherGeneva : Department of History, Economics and Society
  • Working Papers of the Department of History, Economics and Society – Political economy; 03/2021
Publication date2021

This chapter provides a historical overview of the efforts for international cooperation in pursuit of financial stability. We argue that there are two fundamental threats likely to undermine the actions of an international lender of last resort (ILOLR): debtor moral hazard and creditor moral hazard. During the Pax Britannica years, the Bank of England and the Bank of France were de facto ILOLR and managed to contain both types of moral hazard. In the interwar years, the League of Nations developed new forms of last-resort loans but failed to prevent the Great Depression because of the lack of cooperation between top capital-exporting countries. Since its establishment in 1944, the International Monetary Fund (IMF) has granted various credit facilities conditioned on the recipient countries accepting macroeconomic stabilization. The financial globalization process that started in the 1980s has exacerbated creditor moral hazard. This issue, largely overlooked by the IMF, should be a major source of concern for policy makers.

  • Moral hazard
  • Lender of last resort
  • Financial crises
  • JEL : B26
Citation (ISO format)
FLORES ZENDEJAS, Juan, GAILLARD, Norbert. The International Lender of Last Resort Between Scylla and Charybdis. 2021
Main files (1)
Working paper
  • PID : unige:152743

Technical informations

Creation06/25/2021 4:05:00 PM
First validation06/25/2021 4:05:00 PM
Update time03/16/2023 12:50:24 AM
Status update03/16/2023 12:50:24 AM
Last indexation05/06/2024 7:47:03 AM
All rights reserved by Archive ouverte UNIGE and the University of GenevaunigeBlack