 Are Central Banks Necessary?Charles A. E. Goodhart Chapter 1 in Unregulated Banking, 1991, pp 1-35 from Palgrave Macmillan Abstract: Abstract In the standard approach to the above question, as evidenced, for example, by the papers by Fama (1980) and Tobin (1985), the emphasis has been placed on the special (monetary) features of bank liabilities. Particularly in the American literature, a commercial bank is often regarded as an otherwise standard portfolio manager of a set of securities, with the peculiarity, however, that these security holdings are funded by capital-certain monetary liabilities. Consequently, because bank deposits are redeemable into outside high-powered money at par on a first come first served basis, any doubts about the solvency of the commercial bank, i.e. whether the value of its portfolio is sufficient to repay the claims of its depositors, can lead to a run on the bank — a contagious panic. If, however, the value of that portfolio could be ascertained with certainty it is arguable that some simple reforms could virtually prevent the likelihood either for such a panic to develop or for an insolvency to ensue, in the course of which the depositors might lose some part of the ‘capital certain’ value of their deposits. Keywords: Central Bank; Banking System; Deposit Insurance; Bank Failure; Portfolio Risk (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-11398-9_1 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-11398-9_1 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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