Panama’s economy doing fine without a Central Bank in the last hundred years.
Javier Milei, the President-elect of Argentina, has promised to close the central bank and dollarize the economy to get the country out of its crisis. Many people consider this as yet another crazy proposal of the Mad Milei.
But there is a Latin American country whose economy is doing well without a Central Bank. It is Panama. It does not have a Central Bank since its independence in 1903. Panama is the only country in Latin America that has not experienced a financial collapse, high inflation or currency crisis in the last hundred years. On the other hand, the economy has experienced stable and resilient growth with low inflation and interest rates. This is even more amazing in view of the fact that the country has suffered with political crises and corruption cases. Panama’s unique economic management without a central bank is an intriguing case in global economics.
The country does not print currency and has adopted US Dollar as de facto currency. The absence of a central bank has resulted in a completely market-driven money supply and interest rates. There are no capital controls despite the presence of a large number of foreign banks. There is no deposit insurance and no lender of last resort, so banks have to act responsibly at their own risk. No bail out or rescue by government.
Of course, Panama is a small country of 5.5 million people with a special historical link to United States which built and controlled the Panama canal for a long time. Panama’s model may not work with large economies and it might be complicated for Argentina which has its own unique crisis with excessive external debt and severe shortage of foreign exchange.
More in the article… https://mises.org/library/panama-has-no-central-bank
Javier Milei, the President-elect of Argentina, has promised to close the central bank and dollarize the economy to get the country out of its crisis. Many people consider this as yet another crazy proposal of the Mad Milei.
But there is a Latin American country whose economy is doing well without a Central Bank. It is Panama. It does not have a Central Bank since its independence in 1903. Panama is the only country in Latin America that has not experienced a financial collapse, high inflation or currency crisis in the last hundred years. On the other hand, the economy has experienced stable and resilient growth with low inflation and interest rates. This is even more amazing in view of the fact that the country has suffered with political crises and corruption cases. Panama’s unique economic management without a central bank is an intriguing case in global economics.
The country does not print currency and has adopted US Dollar as de facto currency. The absence of a central bank has resulted in a completely market-driven money supply and interest rates. There are no capital controls despite the presence of a large number of foreign banks. There is no deposit insurance and no lender of last resort, so banks have to act responsibly at their own risk. No bail out or rescue by government.
Of course, Panama is a small country of 5.5 million people with a special historical link to United States which built and controlled the Panama canal for a long time. Panama’s model may not work with large economies and it might be complicated for Argentina which has its own unique crisis with excessive external debt and severe shortage of foreign exchange.
More in the article… https://mises.org/library/panama-has-no-central-bank
