BIS paper says liquidity regulation should not replace lender of last resort function
Lender of last resort and liquidity regulations perform separate roles
A central bank's lender of last resort (LOLR) function is best used to tackle a different kind of crisis than liquidity regulations and therefore one cannot replace the other, according to a working paper published on Friday by the Bank for International Settlements (BIS).
Why do we need both liquidity regulations and a lender of last resort? by Mark Carlson, Burcu Duygan-Bump and William Nelson studies the experience of the Federal Reserve during the 2008 financial crisis.
The authors argue the
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