Published Thursday, April 26, 2007 by David Saied
For a real-world example of how a system of market-chosen monetary policy would work in the absence of a central bank, one need not look to the past, writes David Saied. An example exists in present-day Central America, in the Republic of Panama, a country that has lived without a central bank since its independence, with a very successful and stable macroeconomic environment. There is no deposit insurance and no lender of last resort, so banks have to act in a responsible manner. Any bad loans will be paid by the stockholders; no one will bail these banks out if they get into trouble.
(Original Text)
Panama Has No Central Bank (1.41 MB)