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Free banking and the stability of early joint-stock banking

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  • C. R. Hickson
  • J. D. Turner

Abstract

Proponents of free banking argue that systems adopting their policies will be stable. In this paper, we present evidence suggesting that, in general, early joint-stock banking systems did not adopt free banking, and those that did proved to be unstable. In particular, we demonstrate that those systems imposing regulations were generally stable. We rationalise the success of regulation as a pragmatic solution to the time-inconsistency problem arising from the peculiar nature of the banking firm. Notably, we find that the 'golden age' of free banking stability can be attributed to restrictions on the organisational form of the early banking firm. Copyright 2004, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/cje/beh036
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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 28 (2004)
Issue (Month): 6 (November)
Pages: 903-919

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Handle: RePEc:oup:cambje:v:28:y:2004:i:6:p:903-919

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Cited by:
  1. Arun, Thankom G. & Turner, John David, 2003. "Corporate Governance of Banks in Developing Economies: Concepts and Issues," Development Economics and Public Policy Working Papers 30551, University of Manchester, Institute for Development Policy and Management (IDPM).

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