What do we really know about the long-term evolution of central banking? Evidence from the past, insights for the present
The ongoing financial crisis is shaking central bankers’ certainties about their mission, and a rethinking of such mission can greatly benefit from a non-finalistic reassessment of how central banking has evolved over the centuries. This paper does so by taking a functional, instead of an institutional approach. The survey covers the provision of both microeconomic (financial stability) and macroeconomic (monetary stability) central banking functions in the West since the Middle Ages. The existence of a number of important trends (some unidirectional, some cyclical) is underlined. The findings have implications for the current debate on the institutional design of central banking, both in the U.S. and in the eurozone. Historical evidence suggests that neither changes in the organizational model of central banks nor government deficit monetization should necessarily be seen as evil; what is crucial to the success of any solution, is that the institutional agreement backing the existence of money-issuing organizations must be credible. The appendix provides a case study on Norway.
|Date of creation:||21 Nov 2011|
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- Fratianni, Michele & Spinelli, Franco, 2006. "Italian city-states and financial evolution," European Review of Economic History, Cambridge University Press, vol. 10(03), pages 257-278, December.
- Bindseil, Ulrich, 2004. "Monetary Policy Implementation: Theory, past, and present," OUP Catalogue, Oxford University Press, number 9780199274543.
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- Richard S. Grossman, 2010. "Unsettled Account: The Evolution of Banking in the Industrialized World since 1800," Economics Books, Princeton University Press, edition 1, volume 1, number 9219.
- Buyst, Erik & Maes, Ivo, 2008. "Central banking in nineteenth-century Belgium: was the NBB a lender of last resort?," Financial History Review, Cambridge University Press, vol. 15(02), pages 153-173, October.
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