Where to Draw Lines: Stability Versus Efficiency
Article first published online: 30 DEC 2010
© 2010 The London School of Economics and Political Science
Volume 78, Issue 310, pages 197–214, April 2011
How to Cite
SARGENT, T. J. (2011), Where to Draw Lines: Stability Versus Efficiency. Economica, 78: 197–214. doi: 10.1111/j.1468-0335.2010.00875.x
- Issue published online: 14 MAR 2011
- Article first published online: 30 DEC 2010
- Final version received 6 September 2010.
What kinds of assets should financial intermediaries be permitted to hold? What kinds of liabilities should they be allowed to issue? Should a government or a central bank offer explicit deposit insurance or implicit deposit insurance by acting as a lender of last resort? This paper reviews how tensions involving stability versus efficiency, and regulation versus laissez faire, have for centuries run through macroeconomic analysis of these questions.