Bank Quote by Gita Gopinath
“If a debt crisis results from government profligacy and mismanagement, rather than from a market failure, it is true that the central bank should not intervene.”
About This Quote
Source Paper: Monetary Policy Review, 2022
When debt crises stem from government mismanagement, central banks should avoid intervention to prevent moral hazard.
In simple terms: Government-caused debt crises should not be bailed out.
Avoid rescuing mismanaged debt.
Themes
Mood
Type
When to use this quote
- government budgeting
- central bank policy
- public debt crises
Key Concepts
Questions to Reflect On
- Should central banks ever intervene in sovereign debt crises?
- How to balance moral hazard and financial stability?
Intervention may be needed to prevent systemic collapse.