Advanced Search
MyIDEAS: Login

The Mayekawa Lecture: The Role of Default in Macroeconomics

Contents:

Author Info

  • Charles A. E. Goodhart

    (Norman Sosnow Professor of Banking and Finance, London School of Economics (E-mail: c.a.goodhart@lse.ac.uk))

  • Dimitrios P. Tsomocos

    (Said Business School, University of Oxford (E-mail: dimitrios.tsomocos@sbs.ox.ac.uk))

Registered author(s):

    Abstract

    What is the main limitation of much modern macroeconomic theory, among the failings pointed out by William R. White at the 2010 Mayekawa Lecture? We argue that the main deficiency is a failure to incorporate the possibility of default, including that of banks, into the core of the analysis. With default assumed away, there can be no role for financial intermediaries, for financial disturbances, or even for money. Models incorporating defaults are, however, harder to construct, in part because the representative agent fiction must be abandoned. Moreover, financial crises are hard to predict and to resolve. All of the previously available alternatives for handling failing systemically important financial institutions (SIFIs) are problematical. We end by discussing a variety of current proposals for improving the resolution of failed SIFIs.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.imes.boj.or.jp/research/papers/me29-4.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

    Volume (Year): 29 (2011)
    Issue (Month): (November)
    Pages: 49-72

    as in new window
    Handle: RePEc:ime:imemes:v:29:y:2011:p:49-72

    Contact details of provider:
    Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
    Phone: +81-3-3279-111
    Fax: +81-3-3510-1265
    Email:
    Web page: http://www.imes.boj.or.jp/
    More information through EDIRC

    Related research

    Keywords: Default; Transversality; Money; Bankruptcy cost; Asset bubbles; Resolution mechanisms;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:29:y:2011:p:49-72

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.