Money dynamics with multiple banks of issue: evidence from Spain 1856-1874
AbstractThis paper analyzes the Spanish monetary system from 1856, when the Bank of Spain was created, to 1874, when it was awarded the monopoly of emission. This period was characterized by the emergence of an unregulated banking system, with multiple banks of issue entitled to emit bank notes. We focus on two main issues: i) the large fluctuations in the money supply during this period; and ii) the lack of a lender of last resort in the banking panic of 1866. To analyze this, we construct a new dataset on money supply aggregates. The paper also estimates the economic impact of monetary fluctuations with the help of a calibrated new Keynesian model. Our results suggest that money supply shocks had a milder effect on inflation and output than the one predicted by the theory.
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Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1119.
Length: 42 pages
Date of creation: Sep 2011
Date of revision:
unregulated banking; Gresham’s`law; lender of last resort; Overend and Gurney crisis;
Find related papers by JEL classification:
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-CBA-2011-09-16 (Central Banking)
- NEP-HIS-2011-09-16 (Business, Economic & Financial History)
- NEP-MAC-2011-09-16 (Macroeconomics)
- NEP-MON-2011-09-16 (Monetary Economics)
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