Financial crises often of an apparently contagious nature have become more frequent over the last two decades than they were previously The monetary authorities especially central banks and in the international context the International Monetary Fund have had to decide how to handle them This has revived interest in the analysis of the role of a Lender of Last Resort LOLR On the one hand such LOLR support actions have been accused of contributing to the currently increased frequency of systemic crises By providing a safety net for banking activities they are said to encourage excessive risk taking moral hazard thus provoking the very crises they are supposed to prevent On the other hand the surprisingly fast recovery experienced after most of these crises may perhaps be attributed to the safety net provided by LOLR facilities which may have dampened real effects by containing contagion Currently the need for and the appropriate design of a LOLR both at the national and international level is hotly debated There are fierce controversies about how to handle crisis management This book assembles a selection of the best available studies in this field and illuminates both sides of the debate After a substantial review of the literature Part I Iooks back to the historical evolution of thought on the conduct of LOLR Parts II and III review contemporary contributions to the debate Part IV explores the international aspects of these issues Overall this Reader provides comprehensive and authoritative coverage of the contending views on how the authorities might respond to financial crises It will appeal to a broad readership including financial and monetary economists commentators on financial subjects central bankers financial regulators and ministries of finance
