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What do we really know about the long-term evolution of central banking? Evidence from the past, insights for the present

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  • Stefano Ugolini

    (Scuola Normale Superiore, Pisa)

Abstract

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.

Suggested Citation

  • Stefano Ugolini, 2011. "What do we really know about the long-term evolution of central banking? Evidence from the past, insights for the present," Working Paper 2011/15, Norges Bank.
    • Handle: RePEc:bno:worpap:2011_15
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    File URL: https://www.norges-bank.no/en/news-events/news-publications/Papers/working-papers/2011/wp-201115/
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    References listed on IDEAS

    as
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    Cited by:

    1. Thorvald Grung Moe, 2012. "Shadow Banking and the Limits of Central Bank Liquidity Support: How to Achieve a Better Balance between Global and Official Liquidity," Economics Working Paper Archive wp_712, Levy Economics Institute.
    2. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 8, pages 263-318, SUERF - The European Money and Finance Forum.
    3. Beat Weber, 2013. "Ordoliberale Geldreform als Antwort auf die Krise?: Bitcoin und Vollgeld im Vergleich," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 82(4), pages 73-88.
    4. Masciandaro Donato, 2012. "Back to the Future?," European Company and Financial Law Review, De Gruyter, vol. 9(2), pages 112-130, July.
    5. Masciandaro, Donato & Romelli, Davide, 2018. "Central bankers as supervisors: Do crises matter?," European Journal of Political Economy, Elsevier, vol. 52(C), pages 120-140.
    6. Stefano Ugolini, 2013. "The Political Economy of Central Banking: Historical Perspectives," Post-Print hal-01294446, HAL.
    7. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
    8. William Roberds & Francois R. Velde, 2014. "Early Public Banks," FRB Atlanta Working Paper 2014-9, Federal Reserve Bank of Atlanta.
    9. L. Dalla Pellegrina & D. Masciandaro & R. Pansini, 2014. "Do exchange rate regimes affect the role of central banks as banking supervisors?," European Journal of Law and Economics, Springer, vol. 38(2), pages 279-315, October.
    10. Poomjai Nacaskul & Kritchaya Janjaroen & Suparit Suwanik, 2012. "Economic Rationales for Central Banking: Historical Evolution, Policy Space, Institutional Integrity, and Paradigm Challenges," Working Papers 2012-04, Monetary Policy Group, Bank of Thailand.
    11. Gary B. Gorton, 2016. "The History and Economics of Safe Assets," NBER Working Papers 22210, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Central banking; monetary policy; financial stability; institutional design;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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