banks play complex, long horizon games and face more than one tradeoff. We account for these issues in a simple infinite … bankruptcy. We term these factors discipline and stability effects, respectively. The central bank’s welfare decreases with … central banks cannot attain both low inflation and financial stability. …

between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …. We show that imposing minimum liquidity standards for banks ex ante are a crucial requirement for sensible lender of last … resort policy. In addition, we analyse the impact of equity requirements and narrow banking, in the sense that banks are …

The current financial crisis has sparked intense debate about how weak banks should be resolved. Despite international …

and Target credit granted by core-country central banks have replaced private international capital flows in financing the … reversal materialized in the decline in foreign claims of German commercial banks. The inflow of foreign flight capital into …