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Banks, Free Banks, And U.S. Economic Growth

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  • MATTHEW JAREMSKI
  • PETER L. ROUSSEAU

Abstract

The “Federalist financial revolution†may have jump-started the U.S. economy into modern growth, but the Free Banking System (1837-1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county-level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state-chartered banks seem to have strong and positive effects on manufacturing and urbanization.

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File URL: http://hdl.handle.net/10.1111/j.1465-7295.2012.00495.x
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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 51 (2013)
Issue (Month): 2 (04)
Pages: 1603-1621

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Handle: RePEc:bla:ecinqu:v:51:y:2013:i:2:p:1603-1621

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References

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  1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  2. Rousseau, Peter L. & Sylla, Richard, 2005. "Emerging financial markets and early US growth," Explorations in Economic History, Elsevier, vol. 42(1), pages 1-26, January.
  3. Rousseau, Peter L., 2002. "Jacksonian Monetary Policy, Specie Flows, And The Panic Of 1837," The Journal of Economic History, Cambridge University Press, vol. 62(02), pages 457-488, June.
  4. Bodenhorn,Howard, 2000. "A History of Banking in Antebellum America," Cambridge Books, Cambridge University Press, number 9780521669993, October.
  5. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-91, December.
  6. Arthur J. Rolnick & Warren E. Weber, 1986. "Inherent Instability in Banking: The Free Banking Experience," Cato Journal, Cato Journal, Cato Institute, vol. 5(3), pages 877-890, Winter.
  7. Howard Bodenhorn & David Cuberes, 2010. "Financial development and city growth: Evidence from Northeastern American cities, 1790-1870," Working Papers 2010/35, Institut d'Economia de Barcelona (IEB).
  8. Sokoloff, Kenneth L., 1984. "Investment in Fixed and Working Capital During Early Industrialization: Evidence from U. S. Manufacturing Firms," The Journal of Economic History, Cambridge University Press, vol. 44(02), pages 545-556, June.
  9. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-78, November.
  10. Gerald P. Dwyer, Jr. & Iftekhar Hasan, 1996. "Suspension of payments, bank failures, and the nonbank public's losses," Working Paper 96-3, Federal Reserve Bank of Atlanta.
  11. Rolnick, Arthur J. & Weber, Warren E., 1984. "The causes of free bank failures : A detailed examination," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 267-291, November.
  12. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(2), pages 141-67, May.
  13. Scott Fulford, 2010. "If financial development matters, then how? National banks in the United States 1870-1900," Boston College Working Papers in Economics 753, Boston College Department of Economics, revised 15 May 2012.
  14. Matthew Jaremski, 2010. "Free Bank Failures: Risky Bonds versus Undiversified Portfolios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1565-1587, December.
  15. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Do banks facilitate economic growth? If so, what type?
    by Chris Colvin in NEP-HIS blog on 2013-02-13 17:39:33
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Matthew S. Jaremski, 2013. "National Banking's Role in U.S. Industrialization, 1850-1900," NBER Working Papers 18789, National Bureau of Economic Research, Inc.
  2. Peter L. Rousseau, 2013. "Politics on the road to the U.S. monetary union," Vanderbilt University Department of Economics Working Papers 13-00006, Vanderbilt University Department of Economics.

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