We propose a model where systemic and non-systemic banks are exposed to liquidity shortfalls so that a lender of last … resort policy is required. We find that it is socially optimal to override the decision of the central bank by the …

last resort policy is required. We analyze the optimal allocation of lender of last resort responsibilities and find that …We propose a model whereby systemic and non-systemic banks are exposed to liquidity shortfalls such that a lender of …