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Free banking as an evolving system: The case of Switzerland reconsidered

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  • Alexander Fink

Abstract

Selgin and White (Economic Inquiry 25:439–457, 1987 ) argue that during its evolution a free banking system can be expected to reach certain stages of development. This paper uses their conceptual framework to investigate the free banking era in 19th century Switzerland and makes three contributions to the literature on free banking. First, I find that the development of the Swiss banking system closely matches the stylized evolutionary path depicted by Selgin and White. Second, I argue that after the introduction of the federal banknote law in 1882, the Swiss banking system can no longer be characterized as one of free banking. Third, I maintain that the evolutionary approach offered by Selgin and White opens the door to a better explanation of inter-bank note exchange complications during the 30 years preceding the introduction of a Swiss central bank in 1907 than alternative approaches. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Alexander Fink, 2014. "Free banking as an evolving system: The case of Switzerland reconsidered," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 57-69, March.
    • Handle: RePEc:kap:revaec:v:27:y:2014:i:1:p:57-69
    DOI: 10.1007/s11138-013-0211-2
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    References listed on IDEAS

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    1. repec:bla:germec:v:4:y:2003:i::p:389-408 is not listed on IDEAS
    2. Ernst Juerg Weber, 1988. "Currency Competition in Switzerland, 1826‐1850," Kyklos, Wiley Blackwell, vol. 41(3), pages 459-478, August.
    3. Manfred Neldner, 1992. "The experience of free banking," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(4), pages 749-756, December.
    4. Selgin, George & White, Lawrence H, 1999. "A Fiscal Theory of Government's Role in Money," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 154-165, January.
    5. Ignacio Briones & Hugh Rockoff, 2005. "Do Economists Reach a Conclusion on Free-Banking Episodes?," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 279-324, August.
    6. Selgin, George A & White, Lawrence H, 1987. "The Evaluation of a Free Banking System," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 439-457, July.
    7. Neldner, Manfred, 1998. "Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks," European Review of Economic History, Cambridge University Press, vol. 2(3), pages 289-308, December.
    8. George A. Selgin & Lawrence H. White, 1994. "How Would the Invisible Hand Handle Money?," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1718-1749, December.
    9. Manfred Neldner, 2003. "Competition Necessarily Tends to Produce Excess: The Experience of Free Banking in Switzerland," German Economic Review, Verein für Socialpolitik, vol. 4(3), pages 389-408, August.
    10. Manfred Neldner, 1996. "Schweizerische Notenbanken im 19. Jahrhundert und Free Banking: Eine Erwiderung," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(II), pages 203-206, June.
    11. C. R. Hickson & J. D. Turner, 2004. "Free banking and the stability of early joint-stock banking," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(6), pages 903-919, November.
    12. repec:bla:kyklos:v:41:y:1988:i:3:p:459-78 is not listed on IDEAS
    13. F. Ritzmann, 1996. "Schweizerische Notenbanken im 19. Jahrhundert und Free Banking: Diskussionsbeitrag zu M. NELDNER, Bankenfreiheit und Noten-Überemission," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(II), pages 197-201, June.
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    Cited by:

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    2. Kaufmann, Daniel & Stuart, Rebecca, 2024. "Private money and money market integration: The role of payments infrastructure in 19th century Switzerland," QUCEH Working Paper Series 24-08, Queen's University Belfast, Queen's University Centre for Economic History.
    3. Salter, Alexander William & Tarko, Vlad, 2017. "Polycentric banking and macroeconomic stability," Business and Politics, Cambridge University Press, vol. 19(2), pages 365-395, June.

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    More about this item

    Keywords

    Free banking; Switzerland; Evolution; Clearing arrangements; N23; E4;
    All these keywords.

    JEL classification:

    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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