Why Do Banks Need a Central Bank?
AbstractThe conventional view is that the joint provision of payments' services together with portfolio management functions by banks exposes the monetary system to contagious failure, which a Central Bank should prevent. The author argues, however, that the joint provision of payments' services and portfolio management could be safely conducted by mutual collective investment intermediaries without such Central Bank support, and that current technological changes are making this latter development more widespread. The vulnerability of banks lies, instead, primarily in the special nature of their assets, largely nonmarketable, fixed nominal-value loans of uncertain true worth. Copyright 1987 by Royal Economic Society.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 39 (1987)
Issue (Month): 1 (March)
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