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

Daniel Kaufmann and Rebecca Stuart

No 24-05, IRENE Working Papers from IRENE Institute of Economic Research

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.

Keywords: Switzerland; discount rates; money market; financial integration; monetary union; 19th century (search for similar items in EconPapers)
JEL-codes: E43 E44 F33 F45 N13 N23 (search for similar items in EconPapers)
Pages: 44 pages.
Date: 2024-09
New Economics Papers: this item is included in nep-fdg and nep-his
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Working Paper: Private money and money market integration: The role of payments infrastructure in 19th century Switzerland (2024)
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