Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Instability and the Decline(?) of Banking: Public Policy Implications

Contents:

Author Info

  • Hyman P. Minsky

Abstract

Banking plays two roles in a modern capitalist economy: It provides a means of payment and channels resources into capital development. These functions are being performed to a decreasing extent by banks and it appears that this trend will continue. Such developments suggest that the economic role of central banks needs to be reviewed because the role of banks is significant in the ability of the central bank to conduct monetary policy. This ability is changing due the transformation of the channels through which Federal Reserve operations affect the economy away from affecting the availability or cost of financing and toward affecting uncertainty, the evaluation by portfolio managers of the viability of enterprises, and the stability of markets. When central bank operations affect the uncertainty of financial market agents, market reactions will often be out of proportion to the size of the operation. The decline in the importance of banks in financing the capital development of the economy tends to increase the significance of other institutions, such as the Securities and Exchange Commission (SEC) relative to that of the Federal Reserve. The policy question that arises is whether the existing institutional structure of regulation and supervision of financial institutions needs to be changed in a serious way. In general the discourse on economic policy takes place on two plains. One is that of the day-to-day operations of the "authorities" and the rules if any which should guide them. This paper concentrates on the issues of the legislating and associated administrative decisions that affect the structure and operations of banking and financial markets and the government's involvement in setting rules which constrain and contain banking and financial markets.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.levyinstitute.org/pubs/wp127.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_127.

as in new window
Length:
Date of creation: Oct 1994
Date of revision:
Handle: RePEc:lev:wrkpap:wp_127

Contact details of provider:
Web page: http://www.levyinstitute.org

Related research

Keywords:

Other versions of this item:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mirakhor, Abbas & Krichene, Noureddine, 2009. "The Recent Crisis: Lessons for Islamic Finance," MPRA Paper 56022, University Library of Munich, Germany.
  2. Ronnie J. Phillips, . "Narrow Banking Reconsidered, The Functional Approach to Financial Reform," Economics Public Policy Brief Archive ppb_17, Levy Economics Institute.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_127. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.