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Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks

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  • Neldner, Manfred

Abstract

Free banking in Switzerland lasted from 1826 to 1907. Although the system was reasonably successful, the Swiss experience has been almost entirely neglected in the debate over free banking. In its more advanced state of development, the stability of the Swiss free banking system deteriorated, since (1) all assumptions underlying the so-called law of adverse clearings were more or less violated, and (2) the note-issuing banks were prevented by their non-issuing rivals from increasing their discount rates, even if some of them were faced with heavy losses of specie. In 1907, therefore, free banking had to be abandoned.

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  • Neldner, Manfred, 1998. "Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks," European Review of Economic History, Cambridge University Press, vol. 2(3), pages 289-308, December.
    • Handle: RePEc:cup:ereveh:v:2:y:1998:i:03:p:289-308_00
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    Cited by:

    1. Christian Hellwig, 2002. "Money, Intermediaries, and Cash-in-Advance Constraints (February 2003)," UCLA Economics Online Papers 207, UCLA Department of Economics.
    2. Alexander Fink, 2014. "Free banking as an evolving system: The case of Switzerland reconsidered," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 57-69, March.

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