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The institutional rationale of central banking reconsidered

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  • Pablo Paniagua

    (King’s College London)

Abstract

Based on Goodhart’s (1988) The Evolution of Central Banks, I examine both the theoretical arguments and the historical evidence that could sustain the case for the natural emergence of central banks. I criticize Goodhart’s theoretical claim that central banks evolve naturally, by showing that they are far from being uniquely capable of supplying essential banking services. I review historical evidence showing that Goodhart’s historical generalizations are inconsistent with the developments of the vast majority of central banks. History also shows that crucial banking services have tended to be successfully provided by other means, except when governments prevented their development. Finally, I consider whether central banks, if not essential, are at least preferable to alternative arrangements.

Suggested Citation

  • Pablo Paniagua, 2017. "The institutional rationale of central banking reconsidered," Constitutional Political Economy, Springer, vol. 28(3), pages 231-256, September.
    • Handle: RePEc:kap:copoec:v:28:y:2017:i:3:d:10.1007_s10602-016-9223-9
    DOI: 10.1007/s10602-016-9223-9
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    Cited by:

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    3. Pablo Paniagua Prieto, 2022. "The institutional evolution of central banks," Journal of Evolutionary Economics, Springer, vol. 32(3), pages 1049-1070, July.

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    More about this item

    Keywords

    Central banking; Clearinghouse; Clubs; Monetary institutions; Self-governance;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • K2 - Law and Economics - - Regulation and Business Law

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