Private Finance and Public Policy

Garry Schinasi ()

No 2004/120, IMF Working Papers from International Monetary Fund

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.

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 (search for similar items in EconPapers)
Pages: 43
Date: 2004-07-01
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Working Paper: Private Finance and Public Policy (2006)
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