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Private money and money market integration: The role of payments infrastructure in 19th century Switzerland

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  • Kaufmann, Daniel
  • Stuart, Rebecca

Abstract

Using newly collected discount rate data for six Swiss cities, we find no evidence of increasing integration during a 30-year period of lightly regulated free banking. We attribute this to two structural issues: banks had incentives to protect their local monopolies, and the inherent instability of free banking meant that there was always a risk (which varied across banks) of a bank run. We use a novel counterfactual to show that these risks increased discount rate dispersion, and argue that as a result, public regulation of payments infrastructure was necessary for money market integration.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:qucehw:303522
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    References listed on IDEAS

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    1. Davis, Lance E., 1965. "The Investment Market, 1870–1914: The Evolution of a National Market," The Journal of Economic History, Cambridge University Press, vol. 25(3), pages 355-399, September.
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    5. Michael D. Bordo, 2017. "Currency competition in Switzerland," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 68(01), pages 101-108, December.
    6. 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.
    7. Kyongwook Choi & Brandon Dupont, 2007. "Revisiting structural change and market integration in late 19th century American capital markets," Applied Economics, Taylor & Francis Journals, vol. 39(21), pages 2733-2741.
    8. Good, David F., 1977. "Financial Integration in Late Nineteenth-Century Austria," The Journal of Economic History, Cambridge University Press, vol. 37(4), pages 890-910, December.
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    More about this item

    Keywords

    Switzerland; discount rates; money market; financial integration; monetary union; 19th century;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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