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Credit constraints and distance, what room for Central banking? The French experience (1880-1913)

Author

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  • Guillaume Bazot

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Although a relative consensus is emerging about the economic effects of credit development, many controversies remain as to the role of the central bank in that development. This paper addresses the process of credit allocation by the central bank as observed on a spatial basis. It examines how and why improved geographical access to the central bank contributes to credit development by looking at the Fench experience in the ‘classical period' (1880-1913). In an environment of emerging, but highly prudent, deposit banks and the absence of a centralised money market, Banque de Fance branches had enough supply and demand to generate a network. Access to "central loans" hence reduced liquidity constraints and encouraged local banks and firms to lend. We shape the proof in two stages. First, a simple banking model presents our intuition and the mechanisms at work. Second, we take a new data set on the development of credit by French geographic area (département) to test our hypothesis using panel econometric tools. The results show the Banque de France branches having a strong and robust impact on credit development.

Suggested Citation

  • Guillaume Bazot, 2010. "Credit constraints and distance, what room for Central banking? The French experience (1880-1913)," Working Papers halshs-00564839, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00564839
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00564839
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    References listed on IDEAS

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    1. Petersen, Mitchell A & Rajan, Raghuram G, 1997. "Trade Credit: Theories and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 661-691.
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    3. Shizuya Nishimura, 1995. "The French provincial banks, the Banque de France, and bill finance, 1890-1913," Economic History Review, Economic History Society, vol. 48(3), pages 536-554, August.
    4. de Lambert Thibault, 1999. "Michel Lescure, Alain Plessis (dir.), Banques locales et banques régionales en France au XIXe siècle," Histoire, économie & société, Programme National Persée, vol. 18(4), pages 828-828.
    5. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
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