Bonds and Brands: Lessons from the 1820s

Marc Flandreau, Juan Flores Zendejas and Norbert Gaillard

No 6420, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How does sovereign debt emerge and become sustainable? This paper provides a new answer to this unsolved puzzle. Focusing on the early 19th century, we argue that intermediaries' market power served to overcome information asymmetries and sustained the development of sovereign debt. Relying on insights from corporate finance, we argue that capitalists turned to intermediaries' reputations to guide their investment strategies. The outcome was a two-tier global bond market, which was sustained by hierarchical relations among intermediaries. This novel theoretical perspective is backed by new archival evidence and empirical data that have never been gathered so far.

Keywords: Contagion; Intermediaries; Ipo (search for similar items in EconPapers)
JEL-codes: G15 G23 N23 N26 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-his
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Citations: View citations in EconPapers (3)

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