The Age of Central Banks
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The Age of Central Banks

Curzio Giannini

Curzio Giannini’s history of the evolution of central banks illustrates how the most relevant institutional developments have taken place at times of widespread confidence crises and in response to deflationary pressures. The eminent and highly-renowned author provides an analytical perspective to study the evolution of central banking as an endogenous response to crisis and to the ever increasing needs of economic growth. The key argument of the analysis is that crucial innovations in the payment technology (from the invention of coinage to the development of electronic money) could not have taken place without an institution – i.e. the central bank - that could preserve confidence in the instruments used as money. According to Curzio Giannini’s ‘neo-institutionalist’ methodological approach, social institutions are, in fact, essential in the coordination of individual decisions as they minimize transaction costs, overcome information asymmetries and deal with incomplete contracts.
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Curzio Giannini


My intention in this book was not historiographic analysis – since it would have been beyond my abilities, and given that in many countries the history of central banks is still unbroken ground awaiting a competent ploughman – but to conduct a theoretical argument based on historical materials. Following the precepts of John Hicks and Fausto Vicarelli cited at the outset, I have asked whether or not – beyond the forms, which as in every aspect of human society vary from era to era and country to country – there is some consistent logic to the evolution of central banks and central banking, clearly discernable and subject to an economic interpretation. Drawing on neo-institutional theory, I answered in the affirmative. The answer turns on the fundamental contractual incompleteness within which the circulation of money takes place, hence on the necessity for trust if a full-fledged capitalistic economy using credit-based payment instruments is to thrive. What has emerged is what Hicks called a ‘theory of history’. Whether or not it is a persuasive one, of course, is for the reader to say. In this afterword, let me seek to recapitulate the argument and enucleate some thinking points on the future of central banking. My point of departure was the observation that the neo-classical attempt to treat money merely as a commodity, useful though it is in analysing monetary policy and portfolio choices, when it comes to the evolution of monetary forms and institutions actually raises more problems than it solves. In reality, money itself is...

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