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Monetary Union, institutions and financial market integration: Italy, 1862-1905

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  • Toniolo, Gianni
  • Conte, Leandro
  • Vecchi, Giovanni

Abstract

The Paper draws its motivation from the observation that, three years into the single currency, EMU financial markets are making only slow progress towards integration and from the belief that economic history can offer useful insights as to the causes of the phenomenon. In this vein, we investigate a previous case of financial market integration in the wake of monetary unification, that of Italy after 1862. We find that the prices of the Rendita Italiana 5% (Italian Consols) across regional stock exchanges did not fully converge until 1887, 25 years after the creation of a 'monetary union' in the peninsula. Regression analysis shows that variables such as the spread of ICT, trade volumes and the diffusion of the 'single currency' fail to explain the delay in financial market unification. We argue that markets remained relatively fragmented because local vested interests resisted the legal and regulatory changes needed to make arbitrage across individual stock exchanges efficient. A single Italian financial market appeared only when the State imposed more uniform financial market legislation nationwide, a fact that the EU should perhaps not overlook.

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Bibliographic Info

Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 40 (2003)
Issue (Month): 4 (October)
Pages: 443-461

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Handle: RePEc:eee:exehis:v:40:y:2003:i:4:p:443-461

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Web page: http://www.elsevier.com/locate/inca/622830

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References

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  1. Tattara, Giuseppe, 2003. "Paper money but a gold debt: Italy on the gold standard," Explorations in Economic History, Elsevier, vol. 40(2), pages 122-142, April.
  2. Joshua L. Rosenbloom, 1994. "Was There a National Labor Market at the End of the Nineteenth Century? Intercity and Interregional Variation in Male Earnings in Manufacturing," NBER Historical Working Papers 0061, National Bureau of Economic Research, Inc.
  3. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
  4. Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 811-48, October.
  5. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  6. Collins, William J., 1999. "Labor Mobility, Market Integration, and Wage Convergence in Late 19th Century India," Explorations in Economic History, Elsevier, vol. 36(3), pages 246-277, July.
  7. David Jacks, 2000. "Market integration in the North and Baltic Seas, 1500-1800," Economic History Working Papers 22383, London School of Economics and Political Science, Department of Economic History.
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Citations

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Cited by:
  1. Eichengreen, Barry, 2008. "Sui Generis EMU," CEPR Discussion Papers 6642, C.E.P.R. Discussion Papers.
  2. David Chilosi & Oliver Volckart, 2009. "Money, states and empire: financial integration cycles and institutional change in Central Europe, 1400-1520," Economic History Working Papers 27884, London School of Economics and Political Science, Department of Economic History.
  3. Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano, 2013. "Is the Italian Public Debt Really Unsustainable? An Historical Comparison (1861-2010)," CESifo Working Paper Series 4185, CESifo Group Munich.
  4. Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano, 2012. "The Sustainability of Fiscal Policy in Italy: A Long-Term Perspective," CESifo Working Paper Series 3812, CESifo Group Munich.
  5. Filippo Cesarano & Giulio Cifarelli & Gianni Toniolo, 2009. "Exchange Rate Regimes and Reserve Policy on the Periphery: The Italian Lira 1883-1911," Working Papers - Economics wp2009_11.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  6. David Chilosi & Oliver Volckart, 2010. "Books or bullion? Printing, mining and financial integration in Central Europe from the 1460s," Economic History Working Papers 28986, London School of Economics and Political Science, Department of Economic History.
  7. John Hawkins & Paul Masson, 2003. "Economic aspects of regional currency areas and the use of foreign currencies," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 4-42 Bank for International Settlements.
  8. Filippo Cesarano & Giulio Cifarelli & Gianni Toniolo, 2012. "Exchange Rate Regimes and Reserve Policy: The Italian Lira, 1883–1911," Open Economies Review, Springer, vol. 23(2), pages 253-275, April.
  9. Carlo Ciccarelli & Stefano Fenoaltea & Tommaso Proietti, 2010. "The effects of unification: markets, policy, and cyclical convergence in Italy, 1861–1913," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 4(3), pages 269-292, October.
  10. Maixé-Altés, J. Carles & Iglesias, Emma M., 2009. "Domestic monetary transfers and the inland bill of exchange markets in Spain (1775-1885)," Journal of International Money and Finance, Elsevier, vol. 28(3), pages 496-521, April.

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