Lender of Last Resort: Actions, Results and Lessons from Mexico's Experience During the Crisis

The note describes the process of contagion from the International Financial turmoil to domestic markets, the transmission mechanism through the FX market, and how the high volatility of the foreign exchange rate became a risk to financial stability. It explains the dependency of the Mexican financial system on the ability of markets to work without disruption. The main actions taken by policy makers to restore stability to the system are outlined and reviewed. The last section provides the author’s assessment of the effectiveness of the different actions taken, the tools used and lessons learned.Full publication: Re-Thinking the Lender of Last Resort