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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 vuecon-12-00012.

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Date of creation: 13 Dec 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

Related research

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

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References

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  1. Peter L. Rousseau, 2000. "Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837," Vanderbilt University Department of Economics Working Papers 0004, Vanderbilt University Department of Economics, revised Jun 2001.
  2. 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).
  3. Kenneth L. Sokoloff, 1984. "Investment in Fixed and Working Capital During Early Industrialization: Evidence From U.S. Manufacturing Firms," NBER Working Papers 1385, National Bureau of Economic Research, Inc.
  4. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  5. Dwyer, Gerald Jr. & Hasan, Iftekhar, 2007. "Suspension of payments, bank failures, and the nonbank public's losses," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 565-580, March.
  6. Peter L. Rousseau & Richard Sylla, 1999. "Emerging Financial Markets and Early U.S. Growth," NBER Working Papers 7448, National Bureau of Economic Research, Inc.
  7. Bodenhorn,Howard, 2000. "A History of Banking in Antebellum America," Cambridge Books, Cambridge University Press, number 9780521669993.
  8. Rolnick, Arthur J. & Weber, Warren E., 1984. "The causes of free bank failures : A detailed examination," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 267-291, November.
  9. Rockoff, Hugh, 1974. "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(2), pages 141-67, May.
  10. 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, vol. 30(4), pages 657-78, November.
  11. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  12. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-91, December.
  13. Scott Fulford, 2010. "If financial development matters, then how? National banks in the United States 1870-1900," Boston College Working Papers in Economics 753, Boston College Department of Economics, revised 15 May 2012.
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Blog mentions

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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