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- Title
FREE-BANKING AND FINANCIAL STABILITY IN PERU.
- Authors
ZEGARRA, LUIS FELIPE
- Abstract
The theory of free banking establishes that free competition in note issue decreases the probability of financial instability and currency depreciation. This article analyzes the Peruvian experience between 1862 and 1878 and shows that, consistent with the theory, free banking did not lead to financial instability. On the contrary, government intervention in the banking sector contributed to the expansion of paper money and to the decline in the ability of banks to face the demand for specie.
- Subjects
PERU; BANKING industry; FREE banking; ECONOMIC competition; DEPRECIATION; MONETARY policy; MONETARY theory
- Publication
Quarterly Journal of Austrian Economics, 2013, Vol 16, Issue 2, p187
- ISSN
1098-3708
- Publication type
Article