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Governmental Risk Taking Under Market Imperfections: Working Paper 2021-07

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  • Michael Falkenheim

Abstract

An extensive literature debates whether market prices should be used to measure the benefits and costs of risk in government activities or whether the government should be treated as risk neutral. This paper explores the benefits and costs of governmental risk taking in formal models of market imperfections, in which the government serves as an intermediary between different stakeholders in its finances. Some stakeholders cannot participate in markets, either because they belong to future generations or because they have no funds to invest and face borrowing constraints.

Suggested Citation

  • Michael Falkenheim, 2021. "Governmental Risk Taking Under Market Imperfections: Working Paper 2021-07," Working Papers 57255, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:57255
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    File URL: https://www.cbo.gov/system/files/2021-06/57255-Government-Risk-Taking.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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