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

Author

Listed:
  • Alfredo Gigliobianco

    () (Bank of Italy, Structural Economic Analysis Department)

  • Claire Giordano

    () (Bank of Italy, Structural Economic Analysis Department)

Abstract

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.

Suggested Citation

  • Alfredo Gigliobianco & Claire Giordano, 2010. "Economic Theory and Banking Regulation: The Italian Case (1861-1930s)," Quaderni di storia economica (Economic History Working Papers) 5, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:workqs:qse_5
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    File URL: http://www.bancaditalia.it/pubblicazioni/quaderni-storia/2010-0005/Quaderno_storia_economica_5.pdf
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    References listed on IDEAS

    as
    1. Marco Pagano & Paolo Volpin, 2001. "The Political Economy of Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 502-519.
    2. 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.
    3. Frederic S. Mishkin, 2001. "Prudential Supervision: What Works and What Doesn't," NBER Books, National Bureau of Economic Research, Inc, number mish01-1, July.
    4. Hugh Rockoff, 2010. "Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking," Departmental Working Papers 201004, Rutgers University, Department of Economics.
    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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Piergiorgio Alessandri & Pierluigi Bologna & Roberta Fiori & Enrico Sette, 2015. "A note on the implementation of the countercyclical capital buffer in Italy," Questioni di Economia e Finanza (Occasional Papers) 278, Bank of Italy, Economic Research and International Relations Area.
    2. 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.
    3. Riccardo De Bonis & Andrea Silvestrini, 2014. "The Italian financial cycle: 1861-2011," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 8(3), pages 301-334, September.
    4. repec:spr:cliomt:v:11:y:2017:i:2:d:10.1007_s11698-016-0143-8 is not listed on IDEAS
    5. repec:eee:exehis:v:67:y:2018:i:c:p:134-151 is not listed on IDEAS
    6. Vittorio Daniele & Pasquale Foresti & Oreste Napolitano, 2017. "The stability of money demand in the long-run: Italy 1861–2011," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 11(2), pages 217-244, May.
    7. Thiemann, Matthias & Aldegwy, Mohamed & Ibrocevic, Edin, 2016. "Understanding the shift from micro to macro-prudential thinking: A discursive network analysis," SAFE Working Paper Series 136, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

    More about this item

    Keywords

    banking crises; prudential regulation; economic theory;

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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