Expansion of the Money Supply with a Fixed Exchange Rate: “Free Banking” in Sweden under the Silver and Gold Standards, 1834 – 1913
AbstractThis paper studies the role of bank notes issued by the private Enskilda banks in the expansion of the Swedish monetary stock under the classic specie standard maintained during the period 1834-1913. The use of balance sheets has made possible the estimation of more accurate and continuous series of the Swedish money stock and bank reserves. The conclusion of the paper is that the Enskilda banks contributed to Swedish economic expansion and integration, through the provision both of credit and of generally accepted means of payment, beyond what would have been possible for the central bank, constrained as the latter was by specie convertibility requirements. But, the Enskilda banks did not operate according to free banking theory. The re-establishment of the silver standard guaranteed by the central bank was crucial for this process, since it allowed the Enskilda banks to hold central bank notes instead of specie as reserves. The notes issued by the Enskilda banks were accepted as deposits in the banking system but not as reserves. The fact that more Enskilda than Riksbank notes circulated among the public was a result of the law of adverse monetary selection: Gresham’s Law.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 541.
Length: 36 pages
Date of creation: 22 Oct 2003
Date of revision:
Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
Classical Silver and Gold Standards; Endogenous Money; Fractional Reserves; Free banking; Money Supply;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-03 (All new papers)
- NEP-HIS-2003-11-03 (Business, Economic & Financial History)
- NEP-IFN-2003-11-03 (International Finance)
- NEP-MFD-2003-11-03 (Microfinance)
- NEP-MON-2003-11-03 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eichengreen, Barry & Flandreau, Marc, 1994.
"The Geography of the Gold Standard,"
CEPR Discussion Papers
1050, C.E.P.R. Discussion Papers.
- Barry Eichengreen and Marc Flandreau., 1994. "The Geography of the Gold Standard," Center for International and Development Economics Research (CIDER) Working Papers C94-042, University of California at Berkeley.
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