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Estimating Financial Integration in the Middle Ages: What Can We Learn from a TAR Model?

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  • VOLCKART, OLIVER
  • WOLF, NIKOLAUS

Abstract

We estimate a threshold autoregressive model to assess medieval financial integration. Our approach is based on the analysis of deviations between exchange rates and parity, which in a fully integrated market should not exceed bullion points. Hence, the time needed for adjustment, following a violation of the bullion points, is a measure of integration. We apply this approach to exchange between fourteenth- and fifteenth-century Flanders, Lübeck, and Prussia, results showing that whereas it took about eight months to reduce deviations between Flanders and Lübeck by 50 percent, those between Flanders and Prussia were roughly twice as persistent.

Suggested Citation

  • Volckart, Oliver & Wolf, Nikolaus, 2006. "Estimating Financial Integration in the Middle Ages: What Can We Learn from a TAR Model?," The Journal of Economic History, Cambridge University Press, vol. 66(1), pages 122-139, March.
    • Handle: RePEc:cup:jechis:v:66:y:2006:i:01:p:122-139_00
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    Citations

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    Cited by:

    1. Stephen Norman, 2016. "Attractor misspecification and threshold estimation bias," Economics Bulletin, AccessEcon, vol. 36(4), pages 1911-1921.
    2. Ling-Fan Li, 2015. "Information asymmetry and the speed of adjustment: debasements in the mid-sixteenth century," Economic History Review, Economic History Society, vol. 68(4), pages 1203-1225, November.
    3. Jiří Schwarz, 2012. "Impact of institutions on cross-border price dispersion," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(4), pages 617-645, December.
    4. Bernholz, Peter & Kugler, Peter, 2011. "Financial market integration in the early modern period in Spain: Results from a threshold error correction model," Economics Letters, Elsevier, vol. 110(2), pages 93-96, February.
    5. Nogues-Marco, Pilar & Herranz-Loncán, Alfonso & Aslanidis, Nektarios, 2019. "The Making of a National Currency: Spatial Transaction Costs and Money Market Integration in Spain (1825–1874)," The Journal of Economic History, Cambridge University Press, vol. 79(4), pages 1094-1128, December.
    6. Börner, Lars & Severgnini, Battista, 2011. "Epidemic trade," Discussion Papers 2011/12, Free University Berlin, School of Business & Economics.
    7. Volckart, Oliver, 2006. "The influence of information costs on the integration of financial markets: Northern Europe, 1350-1560," SFB 649 Discussion Papers 2006-049, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    8. repec:hum:wpaper:sfb649dp2006-049 is not listed on IDEAS
    9. Lars Boerner & Oliver Volckart, 2009. "Currency unions, optimal currency areas and the integration of financial markets: Central Europe, 14-16thcenturies," Working Papers 9012, Economic History Society.
    10. Boerner, Lars & Volckart, Oliver, 2011. "The utility of a common coinage: Currency unions and the integration of money markets in late Medieval Central Europe," Explorations in Economic History, Elsevier, vol. 48(1), pages 53-65, January.
    11. Emma M., Iglesias & J. Carles, Maixé-Altés, 2021. "Money Market Integration in Spain in the Ninetheen Century: The Role of the 1875-1885 Decade," MPRA Paper 109219, University Library of Munich, Germany.
    12. repec:hum:wpaper:sfb649dp2007-007 is not listed on IDEAS
    13. Adrian R. Bell & Chris Brooks & Tony K. Moore, 2017. "Did Purchasing Power Parity Hold in Medieval Europe?," Manchester School, University of Manchester, vol. 85(6), pages 682-709, December.
    14. Peter Kugler, 2011. "Financial Market Integration in Late Medieval Europe: Results from a Threshold Error Correction Model for the Rhinegulden and Basle Pound 1365-1429," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(III), pages 337-352, September.
    15. Chilosi, David & Volckart, Oliver, 2010. "Good or bad money?: debasement, society and the state in the late Middle Ages," Economic History Working Papers 27946, London School of Economics and Political Science, Department of Economic History.
    16. Chilosi, David & Volckart, Oliver, 2009. "Money, states and empire: financial integration cycles and institutional change in Central Europe, 1400-1520," Economic History Working Papers 27884, London School of Economics and Political Science, Department of Economic History.
    17. Volckart, Oliver, 2007. "Rules, discretion or reputation? Monetary policies and the efficiency of financial markets in Germany, 14th to 16th centuries," SFB 649 Discussion Papers 2007-007, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.

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