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Can Tight and Centralized Financial Regulation Prevent Financial Crises? Czech Government Bond Seignorage in the Historical Perspective

Author

Listed:
  • Tomas Otahal

    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)

  • Vaclav Rybacek

    (University of Economics, Prague)

Abstract

Can tight and centralized financial regulation prevent financial crises? Governments usually respond to financial crises with tightening and centralizing financial regulation. In this paper, we explore the historical parallels between the governmental responses to the financial crises at the end of the 19th and the beginning of the 20th century in the USA and the recent response of the European Union. Our rent- seeking model with endogenous rent derived from the historical narrative predicts that tight and centralized financial regulation might increase the risk of inflationary monetary policy. To illustrate our findings on an empirical example, we calculated the Czech government bond seignorage that represents the rent extracted through inflationary monetary policy.

Suggested Citation

  • Tomas Otahal & Vaclav Rybacek, 2011. "Can Tight and Centralized Financial Regulation Prevent Financial Crises? Czech Government Bond Seignorage in the Historical Perspective," MENDELU Working Papers in Business and Economics 2011-14, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:14_2011
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913

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