Can Tight and Centralized Financial Regulation Prevent Financial Crises? Czech Government Bond Seignorage in the Historical Perspective
MENDELU Working Papers in Business and Economics No. 14/2011
18 Pages Posted: 30 Oct 2010 Last revised: 15 Dec 2012
Date Written: October 28, 2009
Can tight and centralized financial regulation prevent financial crises? Governments usually respond to financial crises with tightening and centralizing financial regulation. In this paper, we explore the historical parallels between the governmental responses to the financial crises at the end of the 19th and the beginning of the 20th century in the USA and the recent response of the European Union. Our rent-seeking model with endogenous rent derived from the historical narrative predicts that tight and centralized financial regulation might increase the risk of inflationary monetary policy. To illustrate our findings on an empirical example, we calculated the Czech governmental bond seignorage that represents rent extracted through inflationary monetary policy.
Keywords: Federal Reserve System, financial crises, financial regulation, interest groups, rent-seeking, US monetary history
JEL Classification: G01, G18, G28, N11, N41
Suggested Citation: Suggested Citation