서유럽 통화통합과 자유은행제도

Abstract

Monetary integration has been pursued as an essential element in building an integrated

Europe by the end of this century. The goal is to build a European Central Banking system.

In this system the central bank would issue a single currency which will replace all the

exsisting national currencies. The central bank would also have monopoly rights to control

the supply of the single currency in the region. In order this system to be workable, each

member country should give up its sovereign power concerning monetary matters.

The efforts, however, have not produced any visible results except for the maintanence

of the exchange rate mechanism. Even this is confronted with a serious challenge as the

necessary policy coordination among member nations has become difficult. It is evident

that each country is very reluctant to give up its monetary sovereign power.

These problems then suggest that the approach toward monetary integration through

centralization of the money issuing business may not be the optimal solution. In this paper

I propose an alternative system. In this system instead of establishing a new central bank,

all the existing national central banks will be allowed to issue their own currencies.

However, citizens are allowed to use any currency they want. Therefore, central banks

should compete among themselves as competitive money issuers. It is called the free banking

system.

In a free banking system each participant competes for market shares. A currency that

is most convenient to use and is best able to maintaine its value would fetch the largest

market share. Thus each national bank has an incentive to carefully regulate the supply

of money so that its value be maintained at the stable level. As a result in a free banking

system the supply of money is self-regulated by the market system and the value of money

is also automatically maintained at a stable level. Therefore, the free banking system may

be a better alternative to the monopoly central banking system.