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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: http://www.norges-bank.no/en/Published/Papers/working-papers/2011/wp-201115/
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    References listed on IDEAS

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    3. Stefano Ugolini, 2012. "The origins of foreign exchange policy: the National Bank of Belgium and the quest for monetary independence in the 1850s," European Review of Economic History, Oxford University Press, vol. 16(1), pages 51-73, February.
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    5. Robert C. Merton, 1995. "A Functional Perspective of Financial Intermediation," Financial Management, Financial Management Association, vol. 24(2), Summer.
    6. Redish,Angela, 2006. "Bimetallism," Cambridge Books, Cambridge University Press, number 9780521028936, March.
    7. Richard S. Grossman, 2010. "Unsettled Account: The Evolution of Banking in the Industrialized World since 1800," Economics Books, Princeton University Press, edition 1, number 9219, June.
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    Citations

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    Cited by:

    1. Stefano Ugolini, 2013. "The Political Economy of Central Banking: Historical Perspectives," Post-Print hal-01294446, HAL.
    2. 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.
    3. 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.
    4. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum.
    5. 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.
    6. Gary B. Gorton, 2016. "The History and Economics of Safe Assets," NBER Working Papers 22210, National Bureau of Economic Research, Inc.
    7. 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.
    8. Roberds, William & Velde, Francois R., 2014. "Early Public Banks," Working Paper Series WP-2014-3, Federal Reserve Bank of Chicago.
    9. Donato Masciandaro & Davide Romelli, 2015. "Central Bankers as Supervisors: Do Crises Matter?," BAFFI CAREFIN Working Papers 1504, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    10. 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.
    11. Masciandaro Donato, 2012. "Back to the Future?," European Company and Financial Law Review, De Gruyter, vol. 9(2), pages 112-130, July.

    More about this item

    Keywords

    Central banking; monetary policy; financial stability; institutional design;

    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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