Would a Free Banking System Target NGDP Growth?

Playing at markets: A New Austrian perspective on macroeconomic policy

“…Interestingly, the scholarship on free banking systems-banking systems with no special legal restrictions, with the system subject only to the ordinary law of contract, torts, etc.-suggests that the macro result of having such a system in place is an NGDP target, albeit an unintended one (Selgin 1988(Selgin , 1994White 1989White , 1995Selgin and White 1994; see also Salter 2013Salter , 2014Salter and Young 2015). In such a system, banks would also offset decreases (increases) in velocity with increases (decreases) in the money supply, this time due to profit-maximizing behavior.…”