Title
Solutions to the Moral Hazard Problem Arising from The Lender-of-last-resort Facility
Document Type
Article
Publication Date
1999
Abstract
The provision of liquid funds via a lender-of-last-resort facility has been the chief means by which governments have chosen to prevent or stay bank runs. The introduction of such a facility, however, leads to a moral hazard problem which weakens each financial manager’s commitment to sound banking, and hence may ultimately make the few bank runs which do occur more dramatic in both size and seriousness. In this paper I provide a survey of the various policy measures which have been proposed to mitigate the effects of the moral hazard problem arising from the introduction of a lender-of-last-resort facility.
Recommended Citation
Moore, G. (1999). Solutions to the moral hazard problem arising from the lender-of-last-resort facility. Journal of Economic Surveys, 13(4), 443-476. doi: 10.1111/1467-6419.00090
Comments
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