Sevic, Zeljko --- "Central bank" [1999] ELECD 13; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics" (Edward Elgar Publishing, 1999)

Book Title: The Elgar Companion to Law and Economics

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781858985169

Section: Chapter 6

Section Title: Central bank

Author(s): Sevic, Zeljko

Number of pages: 13

Extract:

6 Central bank
zeljko Sevic`


Introduction
Central banks as social institutions have not attracted a great deal of attention
from researchers in law and economics. Only occasionally is the central bank
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 .a wide research opportu-
nity to law and economics, and emerging 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, government-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, for a while, was 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 recently created nation-
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). ...