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Free Banking – Possible Solution To The Recent Crisis?

Author

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  • APATACHIOAE, Adina

    ("Alexandru Ioan Cuza" University, Iasi, Romania)

Abstract

The free banking system, as a possible solution to alleviate the difficulties made by the recent financial crisis and to avoid such situations in the future, require the absence of central monetary authority and allow the establishment of private banks in conditions of freedom. The purpose of this article is to highlight the opinions pros and cons of adopting a free banking system and the ways in which it could provide a more stable financial system. In literature can be found proposals in the application of a free banking system based on fractional reserve or reserve 100%. Analyzing these issues, we conclude that in the economic systems will be supporters of both solutions, but the application of only one system which can ensure the general welfare must be experimented.

Suggested Citation

  • APATACHIOAE, Adina, 2014. "Free Banking – Possible Solution To The Recent Crisis?," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 1(1), pages 66-72.
    • Handle: RePEc:vls:rojfme:v:1:y:2014:i:1:p:66-72
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    References listed on IDEAS

    as
    1. Bagus, Philipp & Howden, David, 2011. "Unanswered Quibbles with Fractional Reserve Free Banking," MPRA Paper 79594, University Library of Munich, Germany.
    2. Marimon, Ramon & Nicolini, Juan Pablo & Teles, Pedro, 2012. "Money is an experience good: Competition and trust in the private provision of money," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 815-825.
    3. Selgin, George A & White, Lawrence H, 1987. "The Evaluation of a Free Banking System," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 439-457, July.
    4. Selgin, G., 1993. "In Defence of Bank Suspension," Papers 367, Georgia - College of Business Administration, Department of Economics.
    5. Ramon Marimon & Juan Pablo Nicolini & Pedro Teles, "undated". "Money is an Experience Good: Competition and Trust in the Private Provision of Money," Working Papers 563, Barcelona School of Economics.
    6. Philipp Bagus & David Howden, 2012. "Still unanswered quibbles with fractional reserve free banking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 159-171, June.
    7. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
    8. Alistair Milne & Geoffrey E. Wood, 2008. "Banking crisis solutions old and new," Review, Federal Reserve Bank of St. Louis, vol. 90(Sep), pages 517-530.
    9. Bagus, Philipp & Howden, David, 2010. "Fractional Reserve Banking: Some Quibbles," MPRA Paper 79590, University Library of Munich, Germany.
    10. Glasner,David, 2005. "Free Banking and Monetary Reform," Cambridge Books, Cambridge University Press, number 9780521022514, September.
    11. Jean-Charles Rochet, 2008. "Introduction to Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation," Introductory Chapters, in: Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation, Princeton University Press.
    12. Gerald P. Dwyer, 1996. "Wildcat banking, banking panics, and free banking in the United States," Economic Review, Federal Reserve Bank of Atlanta, vol. 81(Dec), pages 1-20.
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    Keywords

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    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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