Quarterly Journal of Austrian Economics
Author:
Luis Felipe Zegarra
Online Publish Date:
Volume 16, No. 2 (Summer 2013) The theory of free banking establishes that free competition in note issue decreases the probability of financial instability and currency depreciation. This article analyzes the Peruvian experience between 1862 and 1878 and shows that, consistent with the theory; free banking did not lead to financial instability.