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Is the Law of Reflux Valid? Evidence from Sweden 1878–1913

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Author Info
Hortlund, Per (The Ratio Institute)
Abstract

In 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 Swed-ish note banking system in 1878–1901 with those of the regime in 1904–1914, when the Bank of Sweden held a note monopoly. Evi-dence suggests that notes did not become less elastic after monopoli-sation, thus lending support to the views of the Banking School.

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File URL: http://www.ratio.se/pdf/wp/ph_reflux.pdf
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Publisher Info
Paper provided by The Ratio Institute in its series Ratio Working Papers with number 61.

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Length: 22 pages
Date of creation: 03 Jan 2005
Date of revision:
Publication status: Forthcoming in Financial History Review.
Handle: RePEc:hhs:ratioi:0061

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Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-587 054 00
Fax: 08-587 054 05
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Web page: http://www.ratio.se/
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Related research
Keywords: Banking School; Free Banking School; Elastic currency; Clearing mechanism; Note competition; Needs of trade; Law of Reflux; Speed of redemption; 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; Growth and Fluctuations - - - Europe: Pre-1913
N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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