Abstract
In investigating the case for an international central bank (ICB), it is useful to begin by reviewing the functions normally associated with a domestic central bank. These duties have evolved over time, the Bank of England Act (1844) setting the ground rules for the growth of central banks. The passage of this Act was a victory for the Currency School.1 This school identified the stabilisation of the price level, through control of the money supply, as the primary role of the central bank. It demanded adherence to the strict quantity theory of money, reflecting the earlier acceptance of the Palmer Rule in 1832. This Rule had called for a fixed volume of securities and a passive exchange of gold against notes.2 The strict money supply rule was applied until 1914. Over this period, the average annual rate of growth of the money stock was less than 1 per cent, compared with a 2.5 per cent average annual rate of growth of output.3
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© 1987 Zannis Res and Sima Motamen
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Heffernan, S.A. (1987). The Costs and Benefits of International Banking. In: Res, Z., Motamen, S. (eds) International Debt and Central Banking in the 1980s. Studies in Banking and International Finance. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08329-9_9
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DOI: https://doi.org/10.1007/978-1-349-08329-9_9
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