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Maximizing profits or pursuing the public good? The bank of Spain as a central bank

Martín-Aceña, Pablo
Martínez-Ruiz, Elena
Publication Genève: Paul Bairoch Institute of Economic History, 2019
Collection Working Papers of the Paul Bairoch Institute of Economic History; 3/2019
Description 28 p.
Abstract The purpose of this study is to examine whether the transition from a system of various issuing banks to a monopoly system was a step in the Bank of Spain becoming a central bank in the true sense of the word (a non-profit maximizing bank); or on the contrary, whether the Bank used its privilege as the only private issuing institution to obtain extra profits, and neglected its duties as a central bank. The study shows that thanks to the monopoly, the Spanish issuer obtained extraordinary profits (above the average for the sector). We also show that the Bank's "private interest" prevailed over the "public interest" (convertibility into gold) and that the monopoly was not a decisive step in its becoming a genuine central bank. The Bank of Spain was a very profitable financial institution for its shareholders, and little concerned with the public interest. History shows that the Bank of Spain's transformation into an institution responsible for monetary and financial policy did not occur until well into the twentieth century.
Keywords Bank of SpainCentral banksBanking market structureIssuing monopolyProfit-maximizing issuing banks.
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Working paper (Accepted version) (1.6 MB) - public document Free access
Project Spanish Ministry of Science and Innovation
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MARTÍN-ACEÑA, Pablo, MARTÍNEZ-RUIZ, Elena, NOGUES-MARCO, Pilar. Maximizing profits or pursuing the public good? The bank of Spain as a central bank. 2019 https://archive-ouverte.unige.ch/unige:124125

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Deposited on : 2019-10-09

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