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Financial Market Integration in Late Medieval Europe: Results from a Threshold Error Correction Model for the Rhinegulden and Basle Pound 1365-1429

  • Peter Kugler
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    This paper analyzes the integration of the foreign exchange market for the Basle Pound and the Rhinegulden and the market for gold and silver bullion for the period 1365–1429. The application of a threshold error correction model indicates that transaction costs prevent arbitrage when the difference between the gold-silver ratio and the exchange rate is within a 7.4% band, whereas larger deviation exchange rate movements close this gap within one year.

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    File URL: http://www.sjes.ch/papers/2011-III-3.pdf
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    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 147 (2011)
    Issue (Month): III (September)
    Pages: 337-352

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    Handle: RePEc:ses:arsjes:2011-iii-3
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    1. Volckart, Oliver & Wolf, Nikolaus, 2006. "Estimating Financial Integration in the Middle Ages: What Can We Learn from a TAR Model?," The Journal of Economic History, Cambridge University Press, vol. 66(01), pages 122-139, March.
    2. François R. Velde & Warren E. Weber, 1998. "A model of bimetallism," Working Papers 588, Federal Reserve Bank of Minneapolis.
    3. Canjels, Eugene & Prakash-Canjels, Gauri & Taylor, Alan M., 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard 1874-1913," CEPR Discussion Papers 4492, C.E.P.R. Discussion Papers.
    4. Nathan S. Balke & Thomas B. Fomby, 1992. "Threshold cointegration," Research Paper 9209, Federal Reserve Bank of Dallas.
      • Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
    5. Eugene Canjels & Gauri Prakash-Canjels & Alan M. Taylor, 2004. "Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 868-882, November.
    6. Gauri Prakash & Alan M. Taylor, 1997. "Measuring Market Integration: A Model of Arbitrage with an Econometric Application to the Gold Standard, 1879-1913," NBER Working Papers 6073, National Bureau of Economic Research, Inc.
    7. Bernholz, Peter & Kugler, Peter, 2011. "Financial market integration in the early modern period in Spain: Results from a threshold error correction model," Economics Letters, Elsevier, vol. 110(2), pages 93-96, February.
    8. Flandreau, Marc R, 2002. ""Water Seeks a Level": Modeling Bimetallic Exchange Rates and the Bimetallic Band," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 491-519, May.
    9. Josef Rosen, 1972. "Prices and Public Finance in Basle, 1360–1535," Economic History Review, Economic History Society, vol. 25(1), pages 1-17, 02.
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