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The Eastern Caribbean Central Bank :, Challenges to an Effective Lender of Last Resort, Pablo Druck, Mario Dehesa

The paper analyzes the challenges for the Eastern Caribbean Central Bank (ECCB) to be an effective lender of last resort (LOLR) as part of a modern banking crisis resolution framework. The main results from the theoretical model of the ECCB's institutional arrangement are that the majority of currency union members may veto emergency lending in the case of a member-specific shock, as such lending may endanger the stability of the currency board (by lowering the central bank's international reserves, thus raising devaluation risk). However, in the presence of contagion across countries, all currency union members have a vested interest in liquidity supply from the central bank. A key policy recommendation is that currency union members need a stronger fiscal position to continue to access international financial markets and sustain the exchange rate peg
Table Of Contents
Contents; I. Introduction; II. The LOLR Facility and its Monetary Effects; III. The ECCB's Institutional Architecture; IV. The Model; Tables; 1. Numerical Simulation of the Liquidity Assistance Model (Two Countries); Box; 1. The CFA Franc Arrangement; V. Conclusions; 2. Liquidity Assistance Model-Including Foreign Credit Line (FCL) (Two Countries); References
Literary Form
non fiction
1st ed.
Description based upon print version of record
Physical Description
1 online resource (20 p.)
Specific Material Designation
Form Of Item

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