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Money demand under free banking: Switzerland 1851-1906

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  • Gerlach, Stefan
  • Kugler, Peter

Abstract

This paper studies money demand in Switzerland under free banking before the establishment of the Swiss National Bank. We find that, in addition to income and the interest rate of savings deposits, the number of banks was an important determinant of long run money demand. It also played a role in the monetary adjustment process. We also detect a strong positive long run impact of real income and the interest rate spread on the number of banks. Moreover, positive deviation of the number of banks from long run equilibrium leads to a decrease in the money stock and leads to a fall in interest rates and an increase in real income.

Suggested Citation

  • Gerlach, Stefan & Kugler, Peter, 2015. "Money demand under free banking: Switzerland 1851-1906," CEPR Discussion Papers 11029, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11029
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    References listed on IDEAS

    as
    1. Ernst Juerg Weber, 1988. "Currency Competition in Switzerland, 1826‐1850," Kyklos, Wiley Blackwell, vol. 41(3), pages 459-478, August.
    2. Weber, Ernst Juerg, 1988. "Currency Competition in Switzerland, 1826-1850," Kyklos, Wiley Blackwell, vol. 41(3), pages 459-478.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    free banking; monetary dynamics; money demand; Switzerland;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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