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Private Finance and Public Policy

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  • Mr. Garry J. Schinasi

Abstract

This paper articulates a logical foundation-drawn from disparate literatures-for understanding why safeguarding financial stability is an important economic policy objective. The paper also explains why private aspects of finance provide broader social economic benefits and have the characteristics of public goods. Unique aspects of finance are examined, as are the linkages between finance, money, and the real economy. Sources of market imperfections in finance are identified and their implications are analyzed. The arguments imply that reaping the full private and social economic benefits of finance requires both private-collective and public-policy involvement as well as a delicate balance between maximizing the benefits of positive externalities (and public goods) and minimizing the costs (including potential instabilities) of other sources of market imperfections in finance.

Suggested Citation

  • Mr. Garry J. Schinasi, 2004. "Private Finance and Public Policy," IMF Working Papers 2004/120, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/120
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    References listed on IDEAS

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    More about this item

    Keywords

    WP; economic system; public goods; market imperfection; store of value; financial risk; medium of exchange; Finance; Financial Stability; Money; Market Failures; market forces; Financial sector stability; Consumption; Loans; Liquidity; Purchasing power; Global;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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