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

Daniel Kaufmann and Rebecca Stuart

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.

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Year of publication:	[2024]
Authors:	Kaufmann, Daniel ; Stuart, Rebecca
Publisher:	[Neuchâtel] : Université de Neuchâtel, Institute de Recherches Économiques
Subject:	Switzerland \| discount rates \| money market \| financial integration \| monetary union \| 19th century \| Schweiz \| Geldmarkt \| Money market \| Währungsunion \| Monetary union \| Finanzmarkt \| Financial market \| Marktintegration \| Market integration \| Geldgeschichte \| Monetary history \| Geldpolitik \| Monetary policy \| Zahlungsverkehr \| Payment transactions