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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
Published in Journal of European economic history. 2020, vol. 49, no. 1, p. 111-140
Abstract This study examines whether the transition from a system of multiple issuing banks to a monopoly on currency issuance was a step in the Bank of Spain's becoming a central bank in the true sense of the word (a non-profit-maximizing institution); or on the contrary, whether the Bank used its privilege as the only private issuing institution to obtain extra profits while neglecting its duties as a central bank. We find that thanks to the monopoly, the Spanish issuer did make extraordinary profits (above average for the banking industry). Further, the Bank's “private interest” prevailed over the “public interest” (convertibility into gold), while the monopoly was not decisive to its becoming a genuine central bank. The Bank of Spain was a highly profitable financial institution for its shareholders, and little concerned with the public interest. History shows that its transformation into an institution responsible for monetary and financial policy did not come until well into the twentieth century.
Keywords Bank of SpainCentral banksBanking market structureIssuing monopolyProfit-maximizing issuing banks
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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. In: The Journal of European Economic History, 2020, vol. 49, n° 1, p. 111-140. https://archive-ouverte.unige.ch/unige:138372

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Deposited on : 2020-07-13

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