
Contents
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18.1 Introduction 18.1 Introduction
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18.2 The Centralization of Payments and the Emergence of Central Banks as Bankers’ Banks 18.2 The Centralization of Payments and the Emergence of Central Banks as Bankers’ Banks
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18.2.1 The Law of Reflux, Multilateral Clearing Systems, and the Emergence of Central Banks 18.2.1 The Law of Reflux, Multilateral Clearing Systems, and the Emergence of Central Banks
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18.2.2 Central Banks and the Regulation of Payment Systems in Tranquil Times 18.2.2 Central Banks and the Regulation of Payment Systems in Tranquil Times
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18.2.3 The Central Bank in Stressful Times: The Lender of Last Resort 18.2.3 The Central Bank in Stressful Times: The Lender of Last Resort
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18.3 Nominal Anchor and Monetary Policy 18.3 Nominal Anchor and Monetary Policy
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18.3.1 Control of the Unit of Account in Earlier Times/Under Metallic Standards 18.3.1 Control of the Unit of Account in Earlier Times/Under Metallic Standards
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18.3.2 Monetary Policy Implementation in Purely Fiat Monetary Systems 18.3.2 Monetary Policy Implementation in Purely Fiat Monetary Systems
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18.3.2.1 Monetary Policy Doctrines 18.3.2.1 Monetary Policy Doctrines
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18.3.2.2 Instruments of Monetary Policy 18.3.2.2 Instruments of Monetary Policy
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18.4 Looking Forward: The Challenges of a Renewed Doctrine of Monetary Policy 18.4 Looking Forward: The Challenges of a Renewed Doctrine of Monetary Policy
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References References
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18 Central Banking
Get accessMichel Aglietta is Professor at the University of Paris-X Nanterre, Scientific Advisor for the Research Center in International Economics (CEPII), consultant at Groupama-am, and former member of the French Council of Economic Advisors attached to the Prime Minister. His most influential writings include Régulation et crise du capitalisme, La Violence de la Monnaie (with A. Orléan), and Globalisation financière: lʼaventure obligée (with A. Brender and Virginie Coudert). Recent books include Corporate Governance adrift (with A Rebérioux), 2005; Désordres dans le capitalisme mondial (with A. Berrebi), 2007; La crise, 2008; and Crise et rénovation de la finance, 2009.
Benoît Mojon is the Head of the Monetary Policy Research Division at the Banque de France. He previously worked in the research departments of the Federal Reserve Bank of Chicago (2007–2008) and the European Central Bank (1998–2006). He was Associated Professor at the University of Aix en Provence from 2004 to 2006. His research on monetary policy transmission and on inflation dynamics was published in leading academic journals such as the Journal of Monetary Economics, the Review of Economics and Statistics, and the NBER Macroannual.
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Published:07 April 2015
Cite
Abstract
This chapter describes the emergence of central banks and the evolution of their functions as responses to the monetary and financial crises of the nineteenth and the twentieth centuries. First, central banks have become bankers’ banks to facilitate the settlement of inter-bank payments. Central bank money is the legal tender of all debts, including bank-issued debts that are used as means of payment by non-financial agents. Second, the repetition of liquidity crises has led central banks to regulate and supervise the banking system. These policies aim to prevent excessive risk-taking by one bank threatening the integrity of the payment system. However, because crises cannot always be avoided, central banks stand ready to lend as a last resort if need be. Finally, central banks conduct monetary policy, that is, they supply money to stabilize the unit of account and thereby provide a nominal anchor to the economy.
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