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Currency unions, optimal currency areas and the integration of financial markets: Central Europe, 14-16thcenturies

Author

Listed:
  • Lars Boerner

    (European University Institute)

  • Oliver Volckart

    (London School of Economics)

Abstract

" This paper employs a new method and dataset to estimate the effect of currency unions on the integration of financial markets in late medieval Central Europe. The analysis reveals that membership of a union strongly and significantly correlated with well- integrated markets. We also examine whether currency unions were endogenous. Our results indicate that markets were significantly better integrated prior to the formation of a union. In addition, we show that currency unions established by autonomous merchant towns were better integrated than unions implemented by territorial rulers. The overall implication is that late medieval Central European monetary diversity was a corollary of weakly integrated markets."

Suggested Citation

  • Lars Boerner & Oliver Volckart, 2009. "Currency unions, optimal currency areas and the integration of financial markets: Central Europe, 14-16thcenturies," Working Papers 9012, Economic History Society.
    • Handle: RePEc:ehs:wpaper:9012
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    References listed on IDEAS

    as
    1. Hatcher, John & Bailey, Mark, 2001. "Modelling the Middle Ages: The History and Theory of England's Economic Development," OUP Catalogue, Oxford University Press, number 9780199244126, Decembrie.
    2. Wolf, Nikolaus & Ritschl, Albrecht, 2003. "Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-War Period," Papers 2004,10, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    3. 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(1), pages 122-139, March.
    4. Herbert G. Grubel, 1970. "The Theory of Optimum Currency Areas," Canadian Journal of Economics, Canadian Economics Association, vol. 3(2), pages 318-324, May.
    5. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 16(33), pages 449-461.
    6. Oliver Volckart, 2007. "Rules, Discretion or Reputation? Monetary Policies and the Efficiency of Financial Markets in Germany, 14th to 16th Centuries," SFB 649 Discussion Papers SFB649DP2007-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    7. Neal, Larry, 1987. "The Integration and Efficiency of the London and Amsterdam Stock Markets in the Eighteenth Century," The Journal of Economic History, Cambridge University Press, vol. 47(1), pages 97-115, March.
    8. Dixit, Avinash, 2000. "A Repeated Game Model of Monetary Union," Economic Journal, Royal Economic Society, vol. 110(466), pages 759-780, October.
    9. Oliver Volckart, 2006. "The Influence of Information Costs on the Integration of Financial Markets: Northern Europe, 1350-1560," SFB 649 Discussion Papers SFB649DP2006-049, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    10. Neal, Larry, 1985. "Integration of International Capital Markets: Quantitative Evidence from the Eighteenth to Twentieth Centuries," The Journal of Economic History, Cambridge University Press, vol. 45(2), pages 219-226, June.
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    Citations

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    Cited by:

    1. Ulrich Pfister & Jana Riedel & Martin Uebele, 2012. "Real Wages and the Origins of Modern Economic Growth in Germany, 16th to 19th Centuries," Working Papers 0017, European Historical Economics Society (EHES).
    2. Wolf, Marvin, 2013. "Währungsunionen und Allmendeproblem," Hannover Economic Papers (HEP) dp-521, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Chilosi, David & Volckart, Oliver, 2010. "Books or bullion? Printing, mining and financial integration in Central Europe from the 1460s," Economic History Working Papers 28986, London School of Economics and Political Science, Department of Economic History.
    4. Chilosi, David & Volckart, Oliver, 2009. "Money, states and empire: financial integration cycles and institutional change in Central Europe, 1400-1520," Economic History Working Papers 27884, London School of Economics and Political Science, Department of Economic History.

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    More about this item

    Keywords

    Financial market integration; currency unions; Late Medieval Europe;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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