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A schematic view of government as regulator and insurer of the financial system

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  • Henri-Paul Rousseau

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

The purpose of this paper is to present a schematic of the interactions between the government as the REGULATOR of financial institutions and the government as the INSURER of financial institutions while taking into account the long-term feedback relationships between the size and the scope of the financial sector and the level of public debt resulting from financial crises over time. The analysis concludes that at certain high level of public debt and size of the expected support of the financial sector by the government, the regulator and /or the central bank may have to "stabilize" the situation, but there may be cases where the support becomes socially "unacceptable."

Suggested Citation

  • Henri-Paul Rousseau, 2019. "A schematic view of government as regulator and insurer of the financial system," PSE Working Papers halshs-01993612, HAL.
    • Handle: RePEc:hal:psewpa:halshs-01993612
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01993612
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    References listed on IDEAS

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    1. Òscar Jordá & Moritz Schularick & Alan M. Taylor, 2016. "Sovereigns Versus Banks: Credit, Crises, and Consequences," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 45-79.
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    7. Moritz Schularick & Alan M. Taylor, 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008," American Economic Review, American Economic Association, vol. 102(2), pages 1029-1061, April.
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