Publication Date
11-2024
Abstract
This chapter offers an alternative approach to the public interest theory of central banking.Instead of interpreting the history of central banking as attempts to solve market failures, we suggest that central bank behavior can be best explained by studying the constraints faced by members of various interest groups, including members of the central banks themselves. Instead of looking uniquely at how private decisions in commercial markets shape central banks’ decisions, we argue that central bank behavior is best predicted when applying the tools of economics to politics, i.e., when using Public Choice.
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