Duncan, A. and Nolan, C. (2023) Adam Smith and the bankers: retrospect and prospect. National Institute Economic Review, 265(1), pp. 70-104. (doi: 10.1017/nie.2023.24)
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Abstract
Adam Smith promoted free banking—private, competitive, convertible banknotes. He also supported restrictions on banks. We study Smith’s views and the era in which they developed, suggesting his ‘regulations’ were a backstop against banks’ risks to depositors but primarily monetary stability. In modern parlance, Smith supported macroprudential regulations to underpin monetary stability, as did Friedman and Schwartz the US FDIC. We discuss why Smith’s vision for banking went unrealised. Bank regulation became microprudential and ran aground in 2008/2009. The prominence of macroprudential regulation now provides a chance to reorientate regulation to support monetary stability. Early signs are not promising.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Nolan, Professor Charles and Duncan, Mr Alfred |
Authors: | Duncan, A., and Nolan, C. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | National Institute Economic Review |
Publisher: | Cambridge University Press |
ISSN: | 0027-9501 |
ISSN (Online): | 1741-3036 |
Published Online: | 03 January 2024 |
Copyright Holders: | Copyright © 2023 The Authors |
First Published: | First published in National Institute Economic Review 265(1):70-104 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher |
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