Contagious Bank Failures in a Free Banking System: A Persistent Misunderstanding - Aix-Marseille Université Access content directly
Journal Articles Journal des économistes et des études humaines Year : 2014

Contagious Bank Failures in a Free Banking System: A Persistent Misunderstanding

Abstract

A recurring citation in systemic risk literature reviews (P. Aghion, P. Bolton, and M. Dewatripont. 2000. "Contagious Bank Failures in a Free Banking System." European Economic Review 44:713-18) offers a model where what they describe as a free banking system is vulnerable to contagious bank runs through clearinghouse loans. The paper ignores key contributions to both free banking and financial history literature, such that the paper is of little relevance to the understanding of the stability of both free banking systems and clearinghouse arrangements. Our criticism concentrates on the institutions of banking absent or misrepresented. It is argued that their conclusions are inapplicable to free banking.

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Dates and versions

hal-01463106 , version 1 (09-02-2017)

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Mathieu Bédard. Contagious Bank Failures in a Free Banking System: A Persistent Misunderstanding. Journal des économistes et des études humaines, 2014, 20 (1), pp.8. ⟨10.1515/jeeh-2014-0005⟩. ⟨hal-01463106⟩
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