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The Acceptability of Money with Multiple Notes Issuers:the Case of Italy (1861-1893)


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  • Fabrizio Mattesini

    (Università di Roma "Tor Vergata")

  • Giuseppina Gianfreda

    (Università della Tuscia)

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    We study the Italian monetary regime from 1861 to the creation of the Bank of Italy in 1893. The regime was characterized by a multi- plicity of note issuers although one of them, the BNS, rapidly became the dominant bank of the country following a process of territorial expansion. We carefully describe the evolution of the system and we analyze its functioning by studying the acceptaibility of banknotes. Since by law banknotes had to be redeemed at par, acceptability is measured by the number of days notes were in circulation. We es- timate the acceptability of the BNS notes in the provinces were the bank had branches and we ?nd that the entry of a smaller issuer lim- ited the capacity of the dominant bank to keep its notes in circulation at local level. We take this as evidence that competition in notes issue worked as an e¤ective discipline device and we argue the fall of the sys- tem should not be readily attributed to the failure of the competittive mechanism.

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    Bibliographic Info

    Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers LuissLab with number 12100.

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    Date of creation: 2012
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    Handle: RePEc:lui:lleewp:12100

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    Keywords: money acceptability; notes redemption; multiple issuers.;

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    1. Rolnick, Arthur J. & Weber, Warren E., 1988. "Explaining the demand for free bank notes," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 47-71, January.
    2. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
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