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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Alternative monetary systems and the quest for stability: can a free banking system deliver in South Africa?
Authors:Saville, Adrian
Bader, Maureen
Spindler, ZaneISNI
Year:2005
Periodical:South African Journal of Economics
Volume:73
Issue:4
Pages:674-693
Language:English
Geographic term:South Africa
Subjects:banking
monetary policy
central banks
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2005.00046.x/pdf
Abstract:The literature on financial systems has paid almost no attention to considering alternatives to South Africa's central banking system. This knowledge gap requires attention given that experiences elsewhere in the world highlight the vulnerabilities of the central banking model in the case of small, open, emerging economies, such as South Africa. Against this backdrop, and using an historical context to explore the arguments, this paper examines whether the central banking model is the best monetary system for South Africa. Because assessing the desirability of monetary systems is a broad theme, which embraces a diverse set of topics that includes price stability, exchange rate stability, efficiency of the banking system and the promotion of economic growth, the paper explores these arguments with an emphasis placed on the achievement of banking sector stability as a necessary condition for the achievement of stability in price inflation and the promotion of economic growth. The paper's findings suggest that the central banking model is not the best model for promoting the objectives of monetary stability and, in particular, price stability, and the result extends to South Africa. The paper goes on to consider the potential benefits of alternatives to the central banking model, including dollarization and monetary union. However, because these systems are not without their own vulnerabilities, the paper considers a third alternative regime, namely free banking. The paper argues that free banking has the capacity to improve South Africa's monetary system and enhance the country's macroeconomic stability. Bibliogr., notes, ref., sum. [ASC Leiden abstract]
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