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Inland Bills of Exchange: Private Money Production without Banks+

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  • Gorton, Gary

Abstract

I study a sample of 482 English inland bills of exchange (where all parties to the bill were in England) during the period 1762-1850. Inland bills were used as a medium of exchange during the Industrial Revolution in the north of England. During this period, they circulated via indorsements, committing each indorser's personal wealth to back the bill. The number of endorsements is a measure of the liquidity/velocity of the bills. I ask what bill characteristics are associated with greater velocity. I also investigate whether bills backed by banks and others backed only by the joint liability of indorsers had different velocities. Bank-backed bills were more liquid than nonbank-backed bills, consistent with the Dang, Gorton, and Holmström (2018) (DGH) theory that the optimal design of private money is debt backed by debt.

Suggested Citation

  • Gorton, Gary, 2024. "Inland Bills of Exchange: Private Money Production without Banks+," Explorations in Economic History, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:exehis:v:92:y:2024:i:c:s0014498323000414
    DOI: 10.1016/j.eeh.2023.101547
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    Keywords

    bills of exchange; industrial revolution;

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