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Market efficiency under institutional change: A historical study of the silver interbank lending market in modern China

Author

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  • Qiao, Huiquan
  • Liu, Fang
  • Zhang, Shuwen

Abstract

This paper examines the operational efficiency of the silver interbank lending rate market in modern China, exploring its influence on financial market development and its critical role within the economic system from a historical perspective. Based on qualitative and quantitative analyses of Shanghai silver interbank lending rates and related economic indicators from 1873 to 1932, the study first outlines the historical trajectory of market development. It then constructs a multiple regression model to empirically test the effects of variables such as industrial expansion, export trade, and silver reserves on the silver lending rate. Finally, by analyzing market fluctuations during special periods (e.g., World War I and the global economic crisis), the paper reveals the market's vulnerabilities and offers insights into financial stability. This research not only deepens the understanding of financial market efficiency in modern history but also provides valuable references for building a more resilient modern interest rate market mechanism.

Suggested Citation

  • Qiao, Huiquan & Liu, Fang & Zhang, Shuwen, 2025. "Market efficiency under institutional change: A historical study of the silver interbank lending market in modern China," Finance Research Letters, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finlet:v:83:y:2025:i:c:s154461232500861x
    DOI: 10.1016/j.frl.2025.107602
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    References listed on IDEAS

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    1. El-Shagi, Makram & Zhang, Lin, 2020. "Trade effects of silver price fluctuations in 19th-century China: A macro approach," China Economic Review, Elsevier, vol. 63(C).
    2. Palma, Nuno & Zhao, Liuyan, 2021. "The Efficiency of the Chinese Silver Standard, 1920–1933," The Journal of Economic History, Cambridge University Press, vol. 81(3), pages 872-908, September.
    3. Palma, Nuno & Zhao, Liuyan, 2020. "The efficiency of the Chinese silver standard, 1920-33," CEPR Discussion Papers 14860, Centre for Economic Policy Research.
    4. Tai‐kuang Ho & Cheng‐chung Lai, 2016. "A Silver Lifeboat, not Silver Fetters: Why and how the Silver Standard Insulated China from the 1929 Great Depression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 403-419, March.
    5. Jacks, David S. & Yan, Se & Zhao, Liuyan, 2017. "Silver points, silver flows, and the measure of Chinese financial integration," Journal of International Economics, Elsevier, vol. 108(C), pages 377-386.
    6. Colin Weiss, 2020. "Contractionary Devaluation Risk: Evidence from the Free Silver Movement, 1878-1900," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 705-720, October.
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