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Issue Q1 2013  
Does modern banking lead to money privatization?  
Thomas Grjebine
Money privatization is seen as one of the main features of modern banking. The development of private payment arrangements and the globalization of banking have indeed led to a growing questioning of central banks' monopoly on the provision of money. This paper analyzes empirically the reality of such a phenomenon and renews the attention on the role of central banks in money creation mechanisms. I adopt a novel approach to determine the weight of private money in modern banking. I first calculate orders of magnitude of the share of transactions made with central bank money in a sample of 15 countries. To investigate the evolution of this variable, I focus on the United States, and I construct new datasets on the total value of transactions in retail and large-value payment systems over the last 40 years. Thanks to this empirical novelty, I get a precise estimate of the share of transactions settled in central bank money (over the total value of transactions) in the US. I then analyze the nature of the assets used for the remaining share of transactions. To do so, I study exhaustively all the arrangements and systems in my sample of countries where settlement potentially involves private money. Empirical evidence questions the existence of a privatization of money and shows the monopoly of central bank money in modern banking. Abstract

Money ; Private money ; Payment interdependencies ; Monetary policy ; Keywords
E42 ; E52 ; E58 ; JEL classification
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