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On Hayek's denationalization of money, free banking and inflation targeting

J. Stephen Ferris () and John Galbraith

The European Journal of the History of Economic Thought, 2006, vol. 13, issue 2, 213-231

Abstract: Recent central bank experience with inflation targeting is used to restate Hayek's reform proposal as a performance contract. This requires banks to first state an explicit inflation target and then promise to perform a set of actions whenever an independent forecast departs from target. Making such actions explicit and observable makes the promise of price stability offered by competing banks operational and enforceable. Competition among banks then leads to convergence on current best practice in the short term and to faster performance evolution as the incentive to innovate induces improvements over the long term.

Keywords: Non-redeemable money; Hayek; free-banking; inflation targeting; performance contracting (search for similar items in EconPapers)
Date: 2006
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The European Journal of the History of Economic Thought is currently edited by José Luís Cardoso

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Handle: RePEc:taf:eujhet:v:13:y:2006:i:2:p:213-231