Debt Financing of Deposit Insurance Payments: A Policy Choice of Real Import Public Deposited

Creator Series Issue number
  • 494
Date Created
  • 1992-05
  • This paper investigates the macroeconomic and welfare effects of a particular public finance decision. That decision was to use debt rather than current taxation to finance deposit insurance payments related to the savings and loan debacle. We find that this decision could have significantly raised real interest rates and affected welfare. The analysis is conducted in a dynamic, open-economy, monetary general equilibrium model in which parameters are set based on empirical observations.

Subject (JEL) Mot-clé Date Modified
  • 08/30/2019
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
  • Federal Reserve Bank of Minneapolis
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