Citation

Discussion Paper Details

Please find the details for DP9563 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: On Keeping Your Powder Dry: Fiscal Foundations of Financial and Price Stability

Author(s): Maurice Obstfeld

Publication Date: July 2013

Keyword(s): bank resolution, banking crisis, financial crisis, financial stability, Fiscal policy and monetary policy

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: Banking systems have rapidly grown to a point where for many countries bank assets amount to multiples of GDP. As a consequence, government?s capacity to provide stability-enhancing fiscal guarantees against systemic crises can no longer be taken for granted. As regulation of dynamic financial markets will inevitably be imperfect, prudent governments need to adjust other facets of macroeconomic policy in order to mitigate financial instability. A precautionary approach to fiscal policy, leading to moderate levels of public debt relative to GDP over the medium term, is essential for the credibility of government promises to support the financial system, as well as the broader economy.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9563

Bibliographic Reference

Obstfeld, M. 2013. 'On Keeping Your Powder Dry: Fiscal Foundations of Financial and Price Stability'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9563