Central Banks and the Governance of Monetary Space

Abstract

From regional redistribution through mortgage markets to the monetary policy effects on local house price dynamics, the Great Financial Crisis (GFC) has been a powerful reminder that money and credit matter for the evolution of the space economy. In addition to the spatially uneven impact of money and credit, the GFC has also underlined the crucial role of central banks as institutional pivot points on which the global financial system hinges. This chapter examines the evolving role and function of central banks in the post-crisis geography of money. Paying particular attention to François Perroux’s analysis of economic spaces, I argue that central banks form the institutional, operational, and functional apex in the inherent hierarchy of global monetary spaces. As such, central banks critically shape three fundamental relationships among constituent economic elements in the Perrouxian system, i.e. (i) monetary space as defined by a plan; (ii) monetary space as a field of forces; and (iii) monetary space as a homogeneous aggregate.The remainder of the paper further argues that, despite an enthusiastic re-engagement with the “economic geography of money and finance” in the decade after the GFC, central banks and monetary space plays no more than a perfunctory role in the current literature. Consequently, much of this rapidly expanding literature tends to remain singularly faithful to locational and agglomerational aspects of what Perroux termed “banal economic space” wherein the true monetary power of central banks is difficult to analyse.

Keywords: Central bank, monetary space, hierarchy of money, François Perroux

JEL Classification: G18, G28, E42, R1