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The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866–1897

  • ROUSSEAU, PETER L.

The rapid growth of deposits in New York over the late nineteenth century is often attributed to the release of pent-up demand for transactions services. I advance a complementary explanation that emphasizes the market for bank shares. The stock market was important because it generated quotations that signaled depositors about the condition of individual banks as innovations in banking practices allowed confidence to grow. A new database of prices, dividends, and balance sheet items for traded banks and a series of dynamic panel models show that fluctuations in bank prices influenced the course of the expansion.

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Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 71 (2011)
Issue (Month): 04 (December)
Pages: 976-1005

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Handle: RePEc:cup:jechis:v:71:y:2011:i:04:p:976-1005_00
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  1. Baskin, Jonathan Barron, 1988. "The Development of Corporate Financial Markets in Britain and the United States, 1600–1914: Overcoming Asymmetric Information," Business History Review, Cambridge University Press, vol. 62(02), pages 199-237, June.
  2. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
  3. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  4. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
  5. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
  6. Peter L. Rousseau & Richard Sylla, 2000. "Emerging Financial Markets and Early U.S. Growth," Econometric Society World Congress 2000 Contributed Papers 1254, Econometric Society.
  7. Davis, Lance E., 1965. "The Investment Market, 1870–1914: The Evolution of a National Market," The Journal of Economic History, Cambridge University Press, vol. 25(03), pages 355-399, September.
  8. John A. James & David F. Weiman, 2010. "From Drafts to Checks: The Evolution of Correspondent Banking Networks and the Formation of the Modern U.S. Payments System, 1850-1914," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2-3), pages 237-265, 03.
  9. Carter,Susan B. & Gartner,Scott Sigmund & Haines,Michael R. & Olmstead,Alan L. & Sutch,Richard & Wri (ed.), 2006. "The Historical Statistics of the United States 5 Volume Hardback Set," Cambridge Books, Cambridge University Press, number 9780521817912, Junio.
  10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  11. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  12. 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.
  13. James, John A. & Weiman, David F., 2011. "The National Banking Acts and the Transformation of New York City Banking During the Civil War Era," The Journal of Economic History, Cambridge University Press, vol. 71(02), pages 338-362, June.
  14. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
  15. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  16. Rousseau, Peter L., 2009. "Share liquidity, participation, and growth of the Boston market for industrial equities, 1854-1897," Explorations in Economic History, Elsevier, vol. 46(2), pages 203-219, April.
  17. Rousseau, Peter L., 1998. "The permanent effects of innovation on financial depth:: Theory and US historical evidence from unobservable components models," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 387-425, July.
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