Central Banks: Reform or Abolish?

Abstract

Advocates of central bank reform must examine why central banks emerged and what forces sustain them. They did not arise in an institutional vacuum, and will not be reformed in an institutional vacuum. The historical origins of central banks explain how they came into existence. The forces sustaining and feeding their growth may differ from those explaining their origin. Plans to abolish central banks constitute an extreme reform. It is doubtful that such plans can succeed without broader institutional change, occurring either first or simultaneously. That is likely true regardless of the strength of evidence on central bank performance. I examine these issues in what follows.

Keywords: U.S. fiscal policy, american monetary system, federal reserve, central bank reform, government fiscal policy, federal reserve history

JEL Classification: E50, E52, E58, E62