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Evolution and Procedures in Central Banking
Gorton and Huang (2001) argue that private coalitions of banks can act as central banks, issuing private money and providing deposit insurance during times of panic. This lender-of-last-resort role depends upon banking panics occurring, because the threat of liquidation makes the private bank coalition incentive compatible, inducing banks to monitor each other. But, despite the evolution of private bank coalitions, government central banks and government deposit insurance schemes historicallydoi:10.1017/cbo9780511510762.011 fatcat:m5ezqbpr7ndtziz7bppdjjddvq