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

Tomáš Otáhal () and Vaclav Rybacek ()
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Vaclav Rybacek: University of Economics, Prague

No 2011-14, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

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.

Keywords: Bureaucracy; corruption; economic efficiency; Chicago Public Choice; Virginia Public Choice; rent-seeking; rule of law (search for similar items in EconPapers)
JEL-codes: G01 G18 G28 N11 N21 N41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his and nep-reg
Date: 2011-10
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Persistent link: http://EconPapers.repec.org/RePEc:men:wpaper:14_2011

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