What does this historical analysis of the lender-of-last-resort function imply for the validity of hegemonic theories of international monetary stability? It confirms that there have been instances, notably the aftermath of World War II, when the economic power of the leading country so greatly surpassed that of all rivals that it succeeded in ensuring the system’s stability in times of crisis by discounting freely,providing countercyclical lending, and maintaining an open market. It suggests, at the same time, that such instances are rare. For a leading economic power to effectively act as lender of last resort, not only must its market power exceed that of all rivals, but it must do so by a very substantial margin.
What does this historical analysis of the lender-of-last-resort function imply for the validity of hegemonic theories of international monetary stability? It confirms that there have been instances, notably the aftermath of World War II, when the economic power of the leading country so greatly surpassed that of all rivals that it succeeded in ensuring the system’s stability in times of crisis by discounting freely,providing countercyclical lending, and maintaining an open market. It suggests, at the same time, that such instances are rare. For a leading economic power to effectively act as lender of last resort, not only must its market power exceed that of all rivals, but it must do so by a very substantial margin.
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