IDEAS home Printed from https://ideas.repec.org/a/eee/exehis/v92y2024ics0014498323000414.html
   My bibliography  Save this article

Inland Bills of Exchange: Private Money Production without Banks+

Author

Listed:
  • Gorton, Gary

Abstract

I study a sample of 482 English inland bills of exchange (where all parties to the bill were in England) during the period 1762-1850. Inland bills were used as a medium of exchange during the Industrial Revolution in the north of England. During this period, they circulated via indorsements, committing each indorser's personal wealth to back the bill. The number of endorsements is a measure of the liquidity/velocity of the bills. I ask what bill characteristics are associated with greater velocity. I also investigate whether bills backed by banks and others backed only by the joint liability of indorsers had different velocities. Bank-backed bills were more liquid than nonbank-backed bills, consistent with the Dang, Gorton, and Holmström (2018) (DGH) theory that the optimal design of private money is debt backed by debt.

Suggested Citation

  • Gorton, Gary, 2024. "Inland Bills of Exchange: Private Money Production without Banks+," Explorations in Economic History, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:exehis:v:92:y:2024:i:c:s0014498323000414
    DOI: 10.1016/j.eeh.2023.101547
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014498323000414
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eeh.2023.101547?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gorton, Gary, 1999. "Pricing free bank notes," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 33-64, August.
    2. Olivier Accominotti & Delio Lucena‐Piquero & Stefano Ugolini, 2021. "The origination and distribution of money market instruments: sterling bills of exchange during the first globalization," Economic History Review, Economic History Society, vol. 74(4), pages 892-921, November.
    3. Gary Gorton, 2017. "The History and Economics of Safe Assets," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 547-586, September.
    4. Robin Pearson & David Richardson, 2001. "Business Networking in the Industrial Revolution[Earlier ve]," Economic History Review, Economic History Society, vol. 54(4), pages 657-679, November.
    5. R. D. Richards, 1927. "The Evolution of Paper Money in England," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 41(3), pages 361-404.
    6. Gorton, Gary & Pennacchi, George, 1990. "Financial Intermediaries and Liquidity Creation," Journal of Finance, American Finance Association, vol. 45(1), pages 49-71, March.
    7. James, John A., 2012. "Panics, payments disruptions and the Bank of England before 18261," Financial History Review, Cambridge University Press, vol. 19(3), pages 289-309, December.
    8. Tri Vi Dang & Gary Gorton & Bengt Holmström & Guillermo Ordoñez, 2017. "Banks as Secret Keepers," American Economic Review, American Economic Association, vol. 107(4), pages 1005-1029, April.
    9. Bryer, R. A., 1993. "The late nineteenth-century revolution in financial reporting: Accounting for the rise of investor or managerial capitalism?," Accounting, Organizations and Society, Elsevier, vol. 18(7-8), pages 649-690.
    10. Cuadras-Morató, Xavier & Rosés, Joan R., 1998. "Bills of exchange as money: sources of monetary supply during the industrialisation of Catalonia, 1844–741," Financial History Review, Cambridge University Press, vol. 5(1), pages 27-47, April.
    11. Julian Hoppit, 1986. "Financial Crises in Eighteenth-century England," Economic History Review, Economic History Society, vol. 39(1), pages 39-58, February.
    12. Maixé-Altés, J. Carles & Iglesias, Emma M., 2009. "Domestic monetary transfers and the inland bill of exchange markets in Spain (1775-1885)," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 496-521, April.
    13. Gorton, Gary, 1996. "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 346-397, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gary B. Gorton, 2020. "Private Money Production without Banks," NBER Working Papers 26663, National Bureau of Economic Research, Inc.
    2. Xu, Chenzi & Yang, He, 2024. "Real effects of supplying safe private money," Journal of Financial Economics, Elsevier, vol. 157(C).
    3. Chen, Qi & Goldstein, Itay & Huang, Zeqiong & Vashishtha, Rahul, 2022. "Bank transparency and deposit flows," Journal of Financial Economics, Elsevier, vol. 146(2), pages 475-501.
    4. Benedikt Ballensiefen & Angelo Ranaldo, 2023. "Safe Asset Carry Trade," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 13(2), pages 223-265.
    5. Tri Vi Dang & Gary Gorton & Bengt Holmström, 2020. "The Information View of Financial Crises," Annual Review of Financial Economics, Annual Reviews, vol. 12(1), pages 39-65, December.
    6. Marcin Kacperczyk & Christophe Pérignon & Guillaume Vuillemey, 2021. "The Private Production of Safe Assets," Journal of Finance, American Finance Association, vol. 76(2), pages 495-535, April.
    7. Benigno, Pierpaolo & Robatto, Roberto, 2019. "Private money creation, liquidity crises, and government interventions," Journal of Monetary Economics, Elsevier, vol. 106(C), pages 42-58.
    8. Jaremski, Matthew & Mathy, Gabrial, 2017. "Looking Back On the Age of Checking in America, 1800-1960," MPRA Paper 78083, University Library of Munich, Germany.
    9. Gary Gorton, 2013. "The Development of Opacity in U.S. Banking," NBER Working Papers 19540, National Bureau of Economic Research, Inc.
    10. Toni Ahnert & Enrico Perotti, 2018. "Seeking Safety," Staff Working Papers 18-41, Bank of Canada.
    11. Jackson, Timothy & Pennacchi, George, 2021. "How should governments create liquidity?," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 281-295.
    12. Haelim Anderson & Daniel Barth & Dong Beom Choi, 2018. "Reducing Moral Hazard at the Expense of Market Discipline: The Effectiveness of Double Liability Before and During the Great Depression," Working Papers 18-06, Office of Financial Research, US Department of the Treasury.
    13. He, Zhiguo & Nagel, Stefan & Song, Zhaogang, 2022. "Treasury inconvenience yields during the COVID-19 crisis," Journal of Financial Economics, Elsevier, vol. 143(1), pages 57-79.
    14. Dwyer Jr., Gerald P. & Samartín, Margarita, 2009. "Why do banks promise to pay par on demand?," Journal of Financial Stability, Elsevier, vol. 5(2), pages 147-169, June.
    15. Jason R. Donaldson & Giorgia Piacentino, 2019. "Money Runs," NBER Working Papers 26298, National Bureau of Economic Research, Inc.
    16. Thomas M. Eisenbach & Gregory Phelan, 2022. "Fragility of Safe Asset Markets," Staff Reports 1026, Federal Reserve Bank of New York.
    17. Michael D. Bordo & William Roberds, 2024. "Central Bank Digital Currencies: An Old Tale with a New Chapter," Working Papers 323, Princeton University, Department of Economics, Center for Economic Policy Studies..
    18. Kristian Blickle & Markus K. Brunnermeier & Stephan Luck, 2022. "Who Can Tell Which Banks Will Fail?," NBER Working Papers 29753, National Bureau of Economic Research, Inc.
    19. Anderson, Haelim & Copeland, Adam, 2023. "Information management in times of crisis," Journal of Monetary Economics, Elsevier, vol. 136(C), pages 35-49.
    20. Gary B. Gorton, 2019. "The Regulation of Private Money," NBER Working Papers 25891, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    bills of exchange; industrial revolution;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:exehis:v:92:y:2024:i:c:s0014498323000414. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622830 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.