Is the Law of Reflux Valid?
AbstractIn the classical monetary debates, the Banking School held that notes would be equally demand-elastic whether supplied by many or a single issuer. The Free Banking School held that notes would be less demand-elastic if supplied by a single issuer. These assertions have rarely, if ever, been subject to more stringent statistical testing. In this paper I compare the elastic properties of the note stock of the Swedish note banking system in 1880–1895 with those of the regime in 1904–1913, when the Bank of Sweden held a note monopoly. Evidence suggests that notes did not become less elastic after monopolisation, thus lending support to the views of the Banking School.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 599.
Length: 24 pages
Date of creation: 15 Jun 2005
Date of revision:
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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More information through EDIRC
Banking School; Free Banking School; Elastic currency; Clearing mechanism; Needs of trade; Law of Reflux; Real bills doctrine;
Find related papers by JEL classification:
- B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
- 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
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
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- Hortlund, Per, 2005. "Clearing vs. Leakage: Does Note monopoly Increase Money and Credit Cycles?," Working Paper Series in Economics and Finance 600, Stockholm School of Economics.
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