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Does modern banking lead to money privatization?


  • Thomas Grjebine


Money privatization is seen as one of the main features of modern banking. The development of private payment arrangements and the globalization of banking have indeed led to a growing questioning of central banks' monopoly on the provision of money. This paper analyzes empirically the reality of such a phenomenon and renews the attention on the role of central banks in money creation mechanisms. I adopt a novel approach to determine the weight of private money in modern banking. I first calculate orders of magnitude of the share of transactions made with central bank money in a sample of 15 countries. To investigate the evolution of this variable, I focus on the United States, and I construct new datasets on the total value of transactions in retail and large-value payment systems over the last 40 years. Thanks to this empirical novelty, I get a precise estimate of the share of transactions settled in central bank money (over the total value of transactions) in the US. I then analyze the nature of the assets used for the remaining share of transactions. To do so, I study exhaustively all the arrangements and systems in my sample of countries where settlement potentially involves private money. Empirical evidence questions the existence of a privatization of money and shows the monopoly of central bank money in modern banking.

Suggested Citation

  • Thomas Grjebine, 2013. "Does modern banking lead to money privatization?," International Economics, CEPII research center, issue 133, pages 50-71.
  • Handle: RePEc:cii:cepiie:2013-q1-133-4

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    Money; Private money; Payment interdependencies; Monetary policy;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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