CEU Electronic Theses and Dissertations, 2022
| Author | Cocchioni, Balint |
|---|---|
| Title | An Agent-Based Simulation of the White-Selgin Model of Free Banking |
| Summary | The following work advances an agent-based simulation of the model of free banking put forth by Lawrence White (2008/1984) and George Selgin (1988). We define ’free banking’ as a banking system where banks are allowed to issue banknotes competitively, and thus no single institution performs the functions of a central bank. We find this question particularly relevant in light of the recent technological developments in the area of cryptocurrencies which carry the implicit promise of a return to privately supplied money. First, we give a brief overview of the history of free banking, its main characteristics, and its apparent advantages. Next, we present an algorithmic, agent-based simulation of the White-Selgin model. We find that the simulation’s behaviour is roughly consistent with both the theoretical predictions and the historical experience, namely that (1) free banks do not expand the supply of liquid assets indefinitely, (2) the system evolves to a state of equilibrium with relatively few bank failures, and (3) the supply of liquid assets correlates positively with its demand. Finally, we draw conclusions with regard to the policy stance towards cryptocurrencies. |
| Supervisor | Lee, Soomin |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2022/cocchioni_balint.pdf |
Visit the CEU Library.
© 2007-2021, Central European University