“Enemy of None but a Common Friend of All” An International Perspective on the Lender-of-Last-Resort Function Curzio Giannini Essays in International Finance No. 214 June 1999, ISBN 0-88165-121-4 (66 pages; 2 tables; 5 figures)

This essay takes a fresh look at the lender-of-last-resort issue and asks whether, how, and to what extent national practices should be adapted to the international environment and how the last-resort lending function can be reshaped at the international level on the basis of recent trends in the activities and practices of the International Monetary Fund. Constructive ambiguity, rather than the distinction between illiquidity and insolvency or penalty-rate financing, makes last-resort lending effective at the national level. Replicating constructive ambiguity at the international level, however, poses several problems with respect to (1) reconciling ample resource availability with technical discretion as to the use of those resources, (2) the considerable risk that, in the absence of limited available enforcement, policy reversals may occur after last-resort lending has been made, and (3) the fact that international creditors are largely beyond the reach of international organizations. Containing moral hazard with respect to creditors is thus no easy task.