The global financial crisis brought public guarantees to the forefront of the policy debate. Based on a review of the theoretical foundations of public guarantees, this paper concludes that the commonly used justifications for public guarantees based solely on agency frictions (such as adverse selection or lack of collateral) and/or un-internalized externalities are flawed. When risk is idiosyncratic, it is highly unlikely that a case for guarantees...
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DETALHES
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2011/12/01
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Documento de trabalho sobre pesquisa de políticas
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WPS5893
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1
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1
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2011/12/01
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Disclosed
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Risk absorption by the state: when is it good public policy ?
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risk aversion
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