Lender of last resort: What have we learned since bagehot?

Abstract

The maintenance of financial stability is facilitated by well-designed "safety-net" arrangements aimed at limiting the risk of disruption in the financial system (crisis prevention) and the consequences of disruption if it arises (crisis management). An important element of crisis management is the lender of last resort (LOLR) function. This article reviews the main ideas on LOLR reflected in the academic literature, going back to Henry Thornton almost 200 years ago. © 2000 Kluwer Academic Publishers.