Central Banks as Sources of Financial Instability.

The current financial crisis has highlighted the utter dependence on contemporary central banks as instruments for assuring the continuous flow of credit after a financial bust and the capacity of such banks to make booms which make those busts possible. The theoretical treatment of central banking...

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Published in:Independent Review Vol. 14; no. 4; pp. 485 - 497
Main Author: Selgin, George
Format: Article
Published: Independent Institute Spring 2010
Subjects:
Online Access:View this record in EBSCOhost
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        Central banking industry
        Financial crises
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          Central banking industry
          Financial crises
      ab: The current financial crisis has highlighted the utter dependence on contemporary central banks as instruments for assuring the continuous flow of credit after a financial bust and the capacity of such banks to make booms which make those busts possible. The theoretical treatment of central banking puts almost complete emphasis on the stabilizing capacity of such banks, reflecting the normative nature of much theoretical work on the subject and the assumption that they succeed in limiting the effects of booms and busts. The writer challenges the conventional treatment of central banking by contending that banks are fundamentally destabilizing.
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