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Monetary stability and the rule of law

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  • Koyama, Mark
  • Johnson, Blake

Abstract

This paper investigates the relationship between the functioning of money and the rule of law. We explore the claim that monetary stability is a necessary condition for the rule of law to operate and that periods of rapid inflation and deflation stemming from monetary instability erode and undermine the rule of law. We support our argument with panel data evidence and four detailed case studies from the Roman empire, the Weimar Republic, the Great Depression and the Great Recession. Our conclusions examine what monetary institutions are most conducive to maintaining monetary stability and the rule of law.

Suggested Citation

  • Koyama, Mark & Johnson, Blake, 2015. "Monetary stability and the rule of law," Journal of Financial Stability, Elsevier, vol. 17(C), pages 46-58.
    • Handle: RePEc:eee:finsta:v:17:y:2015:i:c:p:46-58
    DOI: 10.1016/j.jfs.2014.09.002
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    Cited by:

    1. Hartwell, Christopher A., 2019. "Short waves in Hungary, 1923 and 1946: Persistence, chaos, and (lack of) control," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 532-550.
    2. Hartwell, Christopher A., 2018. "The “Hierarchy of Institutions” reconsidered: Monetary policy and its effect on the rule of law in interwar Poland," Explorations in Economic History, Elsevier, vol. 68(C), pages 37-70.
    3. Hakan Yilmazkuday, 2022. "Inflation and growth: the role of institutions," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(1), pages 167-187, January.
    4. Hartwell, Christopher A & Szybisz, Martin Andres, 2021. "Corralling Expectations: The Role of Institutions in (Hyper)Inflation," MPRA Paper 105612, University Library of Munich, Germany.
    5. Hartwell Christopher A., 2019. "Complexity, Uncertainty, and Monetary Policy: Can the ECB Avoid the Unconventional Becoming the ‘New Normal’?," The Economists' Voice, De Gruyter, vol. 16(1), pages 1-13, December.
    6. George Maher, 2024. "Rebuilding the Roman imperial currency in nineteenth century Britain," Economic Affairs, Wiley Blackwell, vol. 44(2), pages 378-385, June.
    7. Koyama, Mark, 2016. "The long transition from a natural state to a liberal economic order," International Review of Law and Economics, Elsevier, vol. 47(S), pages 29-39.

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    More about this item

    Keywords

    E42; N13; N12; Rule of law; Institutions; Inflation; Monetary instability;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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