Rent-Seeking Origins of Central Banks: The Case of the Federal Reserve System

Tomáš Otáhal ()

No 2011-08, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: What were the purposes for establishment of central banks? Central banks are historically relatively young organizations. Their main purposes are to regulate money supply through interest rates, regulate the banking sector and act as a lender of last resort to banking sector during the time of financial crises. Historical evidence suggests that in the second half of 19th century in the USA private clearing houses were able to provide the banking sector with similar services. In this paper, we follow such evidence and provide Public Choice explanation for establishment of central banks. On the historical example of establishment of the Federal Reserve System we show that the motivation for establishment of the Federal Reserve System might be rather political instead of economic. More precisely, we argue that the Federal Reserve System was established to allow the American Federal Government to control rent- distribution through money supply control and banking sector regulation.

Keywords: Federal Reserve System; financial markets institutions; historical example; rent-seeking (search for similar items in EconPapers)
JEL-codes: D72 D73 E42 E58 N21 (search for similar items in EconPapers)
Pages: 19
Date: 2011-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his, nep-mon and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ftp.mendelu.cz/RePEc/men/wpaper/08_2011.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:men:wpaper:08_2011

Access Statistics for this paper

More papers in MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Luděk Kouba ().