Abstract: This paper explores the optimal degree of funding of public sector pension plans. It is assumed that a … benevolent social planner decides on the contribution of current taxpayers to the funding of public sector pensions next period …, weighing the interests of current and future tax payers. Two elements play a role in the optimal funding decision: the optimal …

literature mainly points to the "bright side" of wholesale funding: sophisticated financiers can monitor banks, disciplining bad … ones but refinancing solvent ones. This paper models a "dark side" of wholesale funding. In an environment with a costless … public signals, triggering inefficient liquidations. We show that the "dark side" of wholesale funding dominates the "bright …