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Alternative Monetary Systems And The Quest For Stability: Can A Free Banking System Deliver In South Africa?

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  • ADRIAN SAVILLE
  • MAUREEN BADER
  • ZANE SPINDLER

Abstract

Once in a while you will stumble upon the truth but most of us manage to pick ourselves up and hurry along as if nothing had happened. Winston Churchill Abstract Since the early 1900s central banking has developed into the most widely adopted monetary regime by sovereign states. Yet, there is a broad raft of evidence which shows that central banking systems have been less successful in delivering macroeconomic stability than alternative monetary systems. The argument is pronounced in the case of emerging economies, a set of countries which includes South Africa. Against this backdrop, this paper reviews the case for central banking in South Africa. Our results lead us to explore various alternatives to central banking, including Dollarisation and monetary union. However, because these systems are not without their own vulnerabilities, we consider a third alternative regime, free banking. We argue that, despite being an almost completely forgotten system, free banking has the capacity to improve South Africa's monetary system and enhance the country's macroeconomic stability.

Suggested Citation

  • Adrian Saville & Maureen Bader & Zane Spindler, 2005. "Alternative Monetary Systems And The Quest For Stability: Can A Free Banking System Deliver In South Africa?," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 674-693, December.
    • Handle: RePEc:bla:sajeco:v:73:y:2005:i:4:p:674-693
    DOI: 10.1111/j.1813-6982.2005.00046.x
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    References listed on IDEAS

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    1. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    2. Salvatore, Dominick & Dean, James W. & Willett, Thomas D. (ed.), 2003. "The Dollarization Debate," OUP Catalogue, Oxford University Press, number 9780195155365, Decembrie.
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