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Economic Theory and Banking Regulation: The Italian Case (1861-1930s)

Listed author(s):
  • Alfredo Gigliobianco

    ()

    (Bank of Italy, Structural Economic Analysis Department)

  • Claire Giordano

    ()

    (Bank of Italy, Structural Economic Analysis Department)

The paper provides a qualitative assessment of the role mainstream economic theory had in orienting Italy's banking legislation from its political unification (1861) to the introduction of the 1936 Banking Act. Five regulatory regimes are considered. Whilst market discipline and self-regulation arguments characterized the first sub-period (1861-1892), the debate over convertibility and limits on note issuance was intense in the second (1893-1906). The third sub-period (1907-1925) was punctuated by two banking crises: the first (1907) vindicated economists who had stressed the need of a lender of last resort � la Bagehot; the second (1921-23) confirmed - to no avail - the dangers congenital to bank-industry ties. The following sub-period (1926-1930) was inaugurated by the first commercial bank regulation (1926) and responded to the prevailing economists' call for restricting bank competition. The 1936 regulation, which inaugurated the approximately five-decade long fifth regime, matured in a virtual vacuum of professional economic debate. Overall, two key factors were found to affect the degree to which legislation drew upon contemporary economic thought: a) the severity of the preceding crisis; and b) the timing of the subsequent regulation.

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File URL: http://www.bancaditalia.it/pubblicazioni/quaderni-storia/2010-0005/Quaderno_storia_economica_5.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Quaderni di storia economica (Economic History Working Papers) with number 5.

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Date of creation: Nov 2010
Handle: RePEc:bdi:workqs:qse_5
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  1. Frederic S. Mishkin, 2001. "Prudential Supervision: What Works and What Doesn't," NBER Books, National Bureau of Economic Research, Inc, number mish01-1.
  2. Hugh Rockoff, 2010. "Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking," Departmental Working Papers 201004, Rutgers University, Department of Economics.
  3. Marco Pagano & Paolo Volpin, 2001. "The Political Economy of Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 502-519.
  4. Gigliobianco Alfredo & Giordano Claire, 2012. "Does Economic Theory Matter in Shaping Banking Regulation? A Case-study of Italy (1861-1936)," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(1), pages 1-78, September.
  5. Bernstein, Michael A., 1990. "American Economic Expertise from the Great War to the Cold War: Some Initial Observations," The Journal of Economic History, Cambridge University Press, vol. 50(02), pages 407-416, June.
  6. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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