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Banks, free banks, and U.S. economic growth

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  • Matthew Jaremski

    ()
    (Department of Economics, Colgate University)

  • Peter Rousseau

    ()
    (Department of Economics, Vanderbilt University)

Abstract

The “Federalist financial revolution†may have jump-started the U.S. economy into modern growth, but the Free Banking System (1837-1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county-level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state-chartered banks seem to have strong and positive effects on manufacturing and urbanization.

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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 12-00012.

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Date of creation: 13 Sep 2012
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Handle: RePEc:van:wpaper:vuecon-12-00012

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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Keywords: Free banking; antebellum banking; financial liberalization; finance-led growth;

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  1. repec:cup:jechis:v:44:y:1984:i:02:p:545-556_03 is not listed on IDEAS
  2. Kenneth L . Sokoloff, 1983. "Investment in Fixed and Working Capital During Early Industrialization: Evidence from U.S. Manufacturing Firms," UCLA Economics Working Papers, UCLA Department of Economics 311, UCLA Department of Economics.
  3. Rousseau, Peter L. & Sylla, Richard, 2005. "Emerging financial markets and early US growth," Explorations in Economic History, Elsevier, Elsevier, vol. 42(1), pages 1-26, January.
  4. Rousseau, Peter L., 2002. "Jacksonian Monetary Policy, Specie Flows, And The Panic Of 1837," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 62(02), pages 457-488, June.
  5. Matthew Jaremski, 2010. "Free Bank Failures: Risky Bonds versus Undiversified Portfolios," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 42(8), pages 1565-1587, December.
  6. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 30(4), pages 657-78, November.
  7. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 717-37, August.
  8. Rolnick, Arthur J. & Weber, Warren E., 1984. "The causes of free bank failures : A detailed examination," Journal of Monetary Economics, Elsevier, Elsevier, vol. 14(3), pages 267-291, November.
  9. Arthur J. Rolnick & Warren E. Weber, 1986. "Inherent Instability in Banking: The Free Banking Experience," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 5(3), pages 877-890, Winter.
  10. Gerald P. Dwyer, Jr. & Iftekhar Hasan, 1996. "Suspension of payments, bank failures, and the nonbank public's losses," Working Paper, Federal Reserve Bank of Atlanta 96-3, Federal Reserve Bank of Atlanta.
  11. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1080-91, December.
  12. Scott Fulford, 2010. "If financial development matters, then how? National banks in the United States 1870-1900," Boston College Working Papers in Economics, Boston College Department of Economics 753, Boston College Department of Economics, revised 15 May 2012.
  13. Howard Bodenhorn & David Cuberes, 2010. "Financial development and city growth: Evidence from Northeastern American cities, 1790-1870," Working Papers 2010/35, Institut d'Economia de Barcelona (IEB).
  14. Bodenhorn,Howard, 2000. "A History of Banking in Antebellum America," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521669993.
  15. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 6(2), pages 141-67, May.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Do banks facilitate economic growth? If so, what type?
    by Chris Colvin in NEP-HIS blog on 2013-02-13 17:39:33
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Cited by:
  1. Matthew S. Jaremski, 2013. "National Banking's Role in U.S. Industrialization, 1850-1900," NBER Working Papers 18789, National Bureau of Economic Research, Inc.
  2. Peter L. Rousseau, 2013. "Politics on the road to the U.S. monetary union," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 13-00006, Vanderbilt University Department of Economics.

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