IDEAS home Printed from https://ideas.repec.org/p/men/wpaper/14_2011.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: http://ftp.mendelu.cz/RePEc/men/wpaper/14_2011.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lambsdorff, Johann Graf, 2002. "Corruption and Rent-Seeking," Public Choice, Springer, vol. 113(1-2), pages 97-125, October.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    3. Rockoff, Hugh, 1972. "American Free Banking Before the Civil War: a Re-Examination," The Journal of Economic History, Cambridge University Press, vol. 32(1), pages 417-420, March.
    4. James Forder, 2003. "‘Independence’ and the founding of the Federal Reserve," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 297-310, August.
    5. Toma, Mark, 1982. "Inflationary bias of the Federal Reserve System : A bureaucratic perspective," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 163-190.
    6. Tomas Otahal, 2011. "Rent-Seeking Origins of Central Banks: The Case of the Federal Reserve System," MENDELU Working Papers in Business and Economics 2011-08, Mendel University in Brno, Faculty of Business and Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wm. Mounts & Clifford Sowell & James Lindley, 1985. "Rent-seeking over time: The continuity of capture," Public Choice, Springer, vol. 46(1), pages 87-94, January.
    2. J.B Crihfield & J.H. Wood, 1995. "Private goals and monetary policy: inflation and resignations from the Federal Reserve Board," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 48(195), pages 441-460.
    3. Niklas Elert & Magnus Henrekson, 2021. "Entrepreneurship prompts institutional change in developing economies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 34(1), pages 33-53, March.
    4. Daniel Albalate & Germà Bel & Francisco González-Gómez & Andrés J. Picazo-Tadeo, 2017. "Weakening political connections by means of regulatory reform: Evidence from contracting out water services in Spain," Journal of Regulatory Economics, Springer, vol. 52(2), pages 211-235, October.
    5. J.B Crihfield & J.H. Wood, 1995. "Private goals and monetary policy: inflation and resignations from the Federal Reserve Board," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 48(195), pages 441-460.
    6. Juan Carlos Henao & David A. Ortiz Escobar, 2018. "Corrupción en Colombia Tomo 2 Enfoques sectoriales sobre corrupción," Books, Universidad Externado de Colombia, Facultad de Derecho, number 1025, August.
    7. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    8. Rodrigo M. S. Moita & Claudio Paiva, 2013. "Political Price Cycles in Regulated Industries: Theory and Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 94-121, February.
    9. Scott Gehlbach & Konstantin Sonin & Ekaterina Zhuravskaya, 2010. "Businessman Candidates," American Journal of Political Science, John Wiley & Sons, vol. 54(3), pages 718-736, July.
    10. Francesco Caselli & Nicola Gennaioli, 2008. "Economics and Politics of Alternative Institutional Reforms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 1197-1250.
    11. Hahn Robert, 2010. "Designing Smarter Regulation with Improved Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, De Gruyter, vol. 1(1), pages 1-19, July.
    12. Fu, Tong & Jian, Ze, 2020. "A developmental state: How to allocate electricity efficiently in a developing country," Energy Policy, Elsevier, vol. 138(C).
    13. Bommer, Rolf, 1995. "Environmental policy and industrial competitiveness: The pollution haven hypothesis reconsidered," Discussion Papers, Series II 262, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    14. Thomas Wyrick & Roger Arnold, 1989. "Earmarking as a deterrent to rent-seeking," Public Choice, Springer, vol. 60(3), pages 283-291, March.
    15. Pavel Ciaian & Ján Pokrivčák & Dušan Drabik, 2008. "Prečo sú niektoré sektory v tranzitívnych ekonomikách menej reformované ako ostatné? prípad výskumu a vzdelávania v oblasti ekonómie [Why some sectors of transition economies are less reformed than," Politická ekonomie, Prague University of Economics and Business, vol. 2008(6), pages 819-836.
    16. Kris James Mitchener & Matthew Jaremski, 2014. "The Evolution of Bank Supervision: Evidence from U.S. States," NBER Working Papers 20603, National Bureau of Economic Research, Inc.
    17. Masciandaro, D. & Nieto, M. & Prast, H.M., 2007. "Financial Governance of Banking Supervision," Other publications TiSEM 65d7ff26-dca3-4da3-86ff-6, Tilburg University, School of Economics and Management.
    18. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 531-559, May.
    19. J. Mark Ramseyer & Eric Rasmusen, 2013. "Lowering the Bar to Raise the Bar: Licensing Difficulty and Attorney Quality in Japan," Working Papers 2013-12, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    20. Ronelle Burger & Canh Thien Dang & Trudy Owens, 2017. "Better performing NGOs do report more accurately: Evidence from investigating Ugandan NGO financial accounts," Discussion Papers 2017-10, University of Nottingham, CREDIT.

    More about this item

    Keywords

    Bureaucracy; corruption; economic efficiency; Chicago Public Choice; Virginia Public Choice; rent-seeking; rule of law;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:men:wpaper:14_2011. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Luděk Kouba (email available below). General contact details of provider: https://edirc.repec.org/data/femencz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.