Free Banking, the Real-Balance Effect, and Walras´ Law

Ludwig Van Den Hauwe

MPRA Paper from University Library of Munich, Germany

Abstract: The author of this article draws special attention to two particular claims of the free bankers concerning the supposed working characteristics of a fractional-reserve free banking system which may strike the reader as questionable. The first of these relates to the alleged absence of a real-balance effect under free banking. The second relates to the free bankers´ reference to Walras´ Law as providing a rationale for the free banking system´s “offsetting” actions when confronted with changes in the public´ s demand to hold bank liabilities. This rationale is defective since it is based on an erroneous interpretation of Walras´ Law. The author´s conclusion does not imply that it is not at all possible, from a rational viewpoint, to make a plausible case for this variant of free banking, only that the argument should be freed from certain questionable tenets.

Keywords: E0; E32; E42; E5; E51; E52 (search for similar items in EconPapers)
JEL-codes: E00 E31 E32 E42 E50 E51 E52 (search for similar items in EconPapers)
Date: 2008-09-17
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/17294/1/MPRA_paper_17294.pdf original version (application/pdf)

Related works:
Working Paper: Free Banking, the Real-Balance Effect, and Walras´ Law (2008)
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:pra:mprapa:17294

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().