Banking, Public Finance, and the Economy: Greece, 1919–1933
Banking, Public Finance, and the Economy: Greece, 1919–1933
Three chronic economic problems afflicted Greece during the inter‐war period: the deficit on the trade account, high public expenditure combined with comparatively low revenues, and a heavy public debt that contributed to more or less permanent monetary problems. The banking system that operated in this environment was characterized by a high degree of monopoly and a low degree of specialization, and was dominated by the large and powerful National Bank of Greece. The National Bank had virtually exclusive rights for currency issue, but it did not accept the obligations of a proper central bank in respect of the discount‐rate policy, open‐market operations, and the need to play a stabilizing role in the economy. However, it did on occasion act as lender‐of‐last‐resort, and this was of considerable benefit to the banking sector.
Keywords: central bank, currency issue, Greece, lender‐of‐last‐resort, monopoly, public debt, public expenditure, specialization, trade deficit
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