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Domestic Exchange Rates and Regional Economic Growth in the United States, 1899–1908: Evidence from Cointegration Analysis

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  • Phillips, Ronnie J.
  • Cutler, Harvey

Abstract

This article examines one feature of the pre—Federal Reserve financial system that has not been widely researched: the market for bank drafts (the “domestic exchanges†). Though the exchanges existed for nearly a century, critics argued that exchange rate fluctuations exacerbated financial panics. We find, using cointegration analysis over the period from 1899 to 1908, that differences in growth rates across regions caused predictable movements in rates. We conclude that the exchanges promoted efficiency in the payments system. This supports the view that the private sector might have developed a unified national system had the Fed not abolished the exchanges.

Suggested Citation

  • Phillips, Ronnie J. & Cutler, Harvey, 1998. "Domestic Exchange Rates and Regional Economic Growth in the United States, 1899–1908: Evidence from Cointegration Analysis," The Journal of Economic History, Cambridge University Press, vol. 58(4), pages 1010-1026, December.
    • Handle: RePEc:cup:jechis:v:58:y:1998:i:04:p:1010-1026_02
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    Cited by:

    1. R. Alton Gilbert, 1999. "Effects of Federal Reserve services on the efficiency of the system for collecting checks in the United States: 1915--30," Working Papers 1999-014, Federal Reserve Bank of St. Louis.
    2. Gilbert, R. Alton, 2000. "The Advent of the Federal Reserve and the Efficiency of the Payments System: The Collection of Checks, 1915-1930," Explorations in Economic History, Elsevier, vol. 37(2), pages 121-148, April.
    3. Faris Alshubiri, 2022. "The Impact of the Real Interest Rate, the Exchange Rate and Political Stability on Foreign Direct Investment Inflows: A Comparative Analysis of G7 and GCC Countries," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(3), pages 569-603, September.
    4. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.

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