Edited by Jürgen G. Backhaus
Chapter 11: Central Bank
ˇ ˇ ´ Zeljko Sevic Introduction Central banks as social institutions have not attracted a great deal of attention from researchers in law and economics. The central bank is referred to as the bearer of banking supervision duties, so mainstream law and economics literature has tended to be concerned only with the central bank’s regulatory function. However, this old social institution has a far broader role than that seen up to now, and it gives wide research opportunities in law and economics, and increasingly in law and ﬁnance (La Porta et al., 1996; 1997). The central bank as an institution has a particularly interesting history. Central bank: history and its (natural) development When the ﬁrst central banks or, more correctly, governmentally-sponsored banks, were incorporated, such as the Swedish Riksbank and the Bank of England in 1668 and 1694, respectively, they were entrusted with a monopoly over money issuing in the metropolitan area or in a part of the country. In the majority of cases the central bank was, for a while, the only joint-stock bank in the country. Usually, this market advantage was ‘paid’ as a credit directly extended to the government. In some cases the establishment of a central bank had a nationalist impetus, as in the case of lately created ˇ ´ national states, like Germany and Italy in the 1870s (Sevic, 1996b), although some authors note that they were established to unify what was a quite chaotic system of note issue (Goodhart, 1988). In contrast to all the good points in the...
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