Central Bank Monopolies and Money Issuance
AbstractThe article deals with the role of the central banks in advanced market economies and the theoretical possibility of abolishing these institutions. Central banks have monopolies in some areas, especially regarding monetary policy. In many countries, central banks also have monopolies in other areas, for example in the payment and clearing transactions for banks and the state. In the context of the financial crises, there have been calls for the abolition of central banks and the restoration of money fully-backed by gold and issued by different subjects. The main reasoning behind these requests is connected with the accusation that central banks have been the basic culprits in the current crisis, because of their monopoly of the issuing money. This argument fails to recognize that central banks do not have a monopoly in issuing money as the dominant share of the money creation is attached with the process of multiplication of demand deposits by commercial banks. Restoration of the money backed by gold is furthermore completely unrealistic. The article discusses the shortage of gold stock as one of many reasons why gold is not suitable for monetary purposes.
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Bibliographic InfoArticle provided by University of Economics, Prague in its journal Politická ekonomie.
Volume (Year): 2009 (2009)
Issue (Month): 5 ()
Postal: Redakce Politické ekonomie, Vysoká škola ekonomická, nám. W. Churchilla 4, 130 67 Praha 3
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
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