William A. Allen


William A. Allen William A. Allen is an honorary Visiting Senior Fellow of Cass Business School, London. He worked for the Bank of England from 1972 to 2004 in a wide range of functions, including monetary policy formulation and financial market operations. From 1978 to 1980 he was seconded to the Bank for International Settlements in Basel, Switzerland, and from 1994 to 1998 he was a member of the European Union Monetary Committee. He was educated at Oxford University and the London School of Economics.




Papers Published in World Economics:


International Liquidity Management Since the Financial Crisis

This article discusses how international liquidity management has been affected by the recent crisis. It notes that since the Bretton Woods system collapsed in 1971 it was expected that the demand for international reserves would diminish, since countries were no longer obliged to sell foreign currencies in case of need to support their own currencies in foreign exchange markets. However, international reserves increased in total from 3.1% of world gross product at the end of 1970 to 16.7% at the end of 2013. The paper explains this phenomenon in the context of the global demand for liquidity up to and after the global financial crisis of 2008-09. Different means of providing international liquidity assurance are assessed and the paper concludes that without an international lender of last resort, the world financial structure remains vulnerable to a new liquidity crisis.

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Reserve Creation and Reserve Pooling in the International Monetary System

The paper reviews the arrangements for meeting additional post-crisis demand for international liquidity. It distinguishes between reserve creation and reserve pooling as a basis for multilateral liquidity facilities; reserve pooling arrangements carry the risk that, in a general crisis, all the members will want to draw at the same time. We analyse the recently agreed enlargement of the International Monetary Fund from this perspective, and conclude that the IMF will carry much more liquidity risk after its enlargement than it has done in the past.

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The Liquidity Consequences of the Euro Area Sovereign Debt Crisis

We examine the liquidity effects of the euro area sovereign debt crisis on euro area banks as a group, on intra-euro area financial flows and on international liquidity. The lending capacity of the euro area banking system has been much weakened, despite the remarkable growth of the operations of the Eurosystem, including its greatly increased lending and its intermediation between national central banks in surplus and deficit countries. The euro crisis has also created international liquidity stresses.

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The International Liquidity Crisis of 2008–2009

The ‘credit crunch’ that began in August 2007 turned into a crisis when Lehman Brothers failed in September 2008. That event caused large international capital flows, including heavy repatriation of dollars to the United States. Central banks, led by the Federal Reserve, augmented the supply of international liquidity through bilateral central bank swap facilities, and thereby prevented the crisis from becoming much worse. We discuss the reasons for establishing swap facilities, the risks that central banks run in extending swap lines and the limitations to their utility in relieving liquidity pressures. We conclude that the credit crisis is likely to have a lasting effect on the international liquidity policies of governments and central banks.

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