Central bank or International Monetary Fund lending should be regarded as a line of credit, analogous to private line … limit its lending reach. We consider in some detail five broad approaches to a central bank's commitment problem: good … credibly limit lending is for it to build up over time a reputation for restraint …

This consideration of central bank lending as a publicly provided line of credit begins by describing how private line …-of-credit contracts control moral hazard and limit lending to insolvent borrowers. The fundamental problem for a central bank is to … credibly commit to limit its lending. Failure to do so creates moral hazard with adverse consequences. Of five candidate …