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Do Banks Improve Financial Market Integration?


  • Brunt, Liam

    (St Johnís College)

  • Edmund Cannon

    (University of Bristol)


Using a large panel of weekly wheat prices, we infer the annual rate of return on capital in each county in England and Wales in the period 1770-1820. Throughout this period markets were efficient in the sense that weekly returns were serially uncorrelated. We show that the interest rate differential between London and each county can be explained by the density of bank coverage in that county. The explosion in provincial banking in England and Wales during the industrial revolution significantly reduced regional differentials in interest rates. This is direct evidence that financial intermediation determines the degree of market integration.

Suggested Citation

  • Brunt, Liam & Edmund Cannon, 2002. "Do Banks Improve Financial Market Integration?," Royal Economic Society Annual Conference 2002 36, Royal Economic Society.
  • Handle: RePEc:ecj:ac2002:36

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    Cited by:

    1. Cannon, Edmund & Brunt, Liam, 2013. "Integration in the English wheat market 1770-1820," CEPR Discussion Papers 9504, C.E.P.R. Discussion Papers.

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