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Rules, discretion or reputation? Monetary policies and the efficiency of financial markets in Germany, 14th to 16th centuries

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  • Volckart, Oliver

Abstract

This paper examines the questions of whether and how feudal rulers were able to credibly commit to preserving monetary stability, and of which consequences their decisions had for the efficiency of financial markets. The study reveals that princes were usually only able to commit to issuing a stable coinage in gold, but not in silver. As for silver currencies, the hypothesis is that transferring the right of coinage to an autonomous city was the functional equivalent to establishing an independent central bank. An analysis of market performance indicates that financial markets between cities that were autonomous with regard to their monetary policies were significantly better integrated and more efficient than markets between cities whose currencies were supplied by a feudal ruler.

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  • 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.
    • Handle: RePEc:zbw:sfb649:sfb649dp2007-007
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    Cited by:

    1. 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.
    2. Von dem Berge, Lukas, 2014. "Parallel currencies in historical perspective," CAWM Discussion Papers 75, University of Münster, Münster Center for Economic Policy (MEP).

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    More about this item

    Keywords

    Financial markets; integration; monetary policy; Middle Ages;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913

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