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Financial Market Discipline in Early-Twentieth-Century Mexico

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  • HUYBENS, ELISABETH
  • JORDAN, ASTRID LUCE
  • PRATAP, SANGEETA

Abstract

We test for the presence of market discipline in the banking sector in early-twentieth-century Mexico. Using financial data from note-issuing banks between 1900 and 1910, we examine whether bank fundamentals influenced the patterns of withdrawals and of note issue. We show that fundamentals were a strong determinant of bank withdrawals and note issue, indicating that market discipline was an important feature of the banking system in this period. This result crucially depends on correcting for selection bias generated by the exit of several banks in the 1907 crisis.

Suggested Citation

  • Huybens, Elisabeth & Jordan, Astrid Luce & Pratap, Sangeeta, 2005. "Financial Market Discipline in Early-Twentieth-Century Mexico," The Journal of Economic History, Cambridge University Press, vol. 65(3), pages 757-778, September.
    • Handle: RePEc:cup:jechis:v:65:y:2005:i:03:p:757-778_00
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    Cited by:

    1. Edgar Tovar-García, 2014. "Market discipline: a review of the Mexican deposit market," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-33, December.
    2. Metin M. Coşgel & Boğaç A. Ergene, 2014. "The selection bias in court records: settlement and trial in eighteenth-century Ottoman Kastamonu," Economic History Review, Economic History Society, vol. 67(2), pages 517-534, May.
    3. Noel Maurer & Stephen Haber, 2007. "Related Lending: Manifest Looting or Good Governance? Lessons from the Economic History of Mexico," NBER Chapters, in: The Decline of Latin American Economies: Growth, Institutions, and Crises, pages 213-242, National Bureau of Economic Research, Inc.

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