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Research for this paper was supported by the Institute for New Economic Thinking (INET) Grant No. INO15-00025. We establish a causal role for banking access in the spread of the Industrial Revolution over the period 1817–1881 by exploiting unique employment data from 10,528 parishes across England and Wales and a novel instrument. We estimate that a one standard deviation increase in 1817 finance employment increases annualized industrial employment growth by 0.93 percentage points. We establish the role of structural transformation as an underlying growth mechanism and show that banking access: (i) increases the industrial employment share; (ii) stimulates urbanization; and (iii) fosters inter-industry transition to high TFP, intermediate and capital-intensive sub-sectors. Postprint

We analyze a consistent two-factor model for pricing temperature derivatives that incorporates the forward looking information available in the market by specifying a model for the dynamics of the complete meteorological forecast curve. The two-factor model is a generalization of the Nelson-Siegel curve model by allowing factors with mean-reversion to a stochastic mean for structural changes and seasonality for periodic patterns. Based on the outcomes of a statistical analysis of forecast data we conclude that the two-factor model captures well the stylized features of temperature forecast curves. In particular, a functional principal component analysis reveals that the model re ects reasonably well the dynamical structure of forecast curves by decomposing their shapes into a tilting and a bending factor. We continue by developing an estimation procedure for the model, before we derive explicit prices for temperature derivatives and calibrate the market price of risk (MPR) from temperature futures derivatives (CAT, HDD, CDD) traded at the Chicago Mercantile Exchange (CME). The factor model shows that the behavior of the implied MPR for futures traded in and out of the measurement period is more stable than other estimates obtained in the literature. This con rms that at least parts of the irregularity of the MPR is not due to irregular risk perception but rather due to information misspecification. Similar to temperature derivatives, this approach can be used for pricing other non-tradable assets.

At the middle of the XIX century, the historical provinces of Moldavia and Wallachia had simultaneous and coordinated plans to establish two national banks, one for each province, as state-sanctioned, official, central banks. While the plan for the Wallachian central bank was thwarted by the ouster of Prince Barbu Dimitrie Stirbey in 1851, the plan for the National Bank of Moldavia was finally realized by Prince Grigore Alexandru Ghica, in 1856, when the international developments weakened the grip that the Russian Empire had over Moldavia. The first Romanian National Bank was, however, a short-lived initiative. In this paper, we will look at the way it was established.

L’analyse systematiquement dualiste des bulles speculatives ne permet pas d’identifier les differents comportements des investisseurs selon qu’ils operent sur le marche des actifs sous-jacents ou sur le marche des produits derives. L’etude de la Bulle des Mers du Sud est, a cet egard, eclairante. Dans cet article, nous montrons qu’en depit d’une evaluation rationnelle des produits derives financiers de la Compagnie des Mers du Sud (les titres de souscription) en tant qu’options d’achat, l’evaluation de l’actif sous-jacent (l’action cms) a souffert d’une confusion liee aux revenus futurs de l’activite de restructuration de la dette publique.

Using a new dataset which contains monthly data on 1015 stocks traded on the London Stock Exchange between 1825 and 1870, we investigate the cross section of stock returns in this early capital market. Unique features of this market allow us to evaluate the veracity of several popular explanations of asset pricing behavior. Using portfolio analysis and Fama–MacBeth regressions, we find that stock characteristics such as beta, illiquidity, dividend yield, and past-year return performance are all positively correlated with stock returns. However, market capitalization and past-three-year return performance have no significant correlation with stock returns.

Building on recent work by Collins et al.. this paper aims to explain the failure of corporate and public initiatives to alleviate poverty before the twentieth century by unravelling the financial rationale behind the various combinations of private efforts, family and neighbourhood help, financial intermediation, and government intervention tried by poor households in the eighteenth and nineteenth century. There existed several financial institutions whose functioning was very similar to modern microfinance institutions, yet none of them were in a position to help the poor. We find that in the Netherlands the boundary of formal financial markets moved down not because of financial innovation, but because of economic growth pushing up wages. Until the last quarter of the 19th-century poor households simply lacked the money to use newly established mutual insurances, savings- and loan banks.

This paper is based on the difference between the formal introduction of a Weberian bureaucracy and its actual implementation through state officials. This difference between the formal institutional framework and its actual implementation could lead to failed reforms. On the other side, there were states which successfully introduced a Weberian bureaucracy like the German state of Baden in the nineteenth century. This paper argues that Civil Service reforms in Baden during the first two decades of the nineteenth century established an internal labor market with a hierarchy of pay levels and clearly defined rules of promotion. These rules of promotion made advancement in the hierarchy, and therefore, an increase in remuneration, inter alia dependent on the performance in regard to administrative processes and rules of professional conduct. This rule generated an incentive to implement the new formal institutional framework, because sticking to the rules led to a monetary reward. The paper tests this hypothesis empirically using a logit as well as a panel regression approach. In doing so, I find that a positive assessment about a district magistrate’s (Amtmann) performance in regard to formal administrative processes and rules of professional conduct increased his probability of promotion by 81 %. The paper also finds incentive mechanisms like a shirking wage. However, it seems that the sound working of these incentive mechanisms took ca. two decades.

The 13th century witnessed a substantial increase in inequality in the distribution of peasant landholdings relative to the distribution of the late 11th century. Innovations in property rights over land in 12th century England induced peasants to include the trading of small parcels of land as part of their risk coping strategy. We argue that these events are related. Recent theoretical work in development economics has explored the relationship between inequality and asset markets. When agents are able to trade productive assets to manage risk, the resulting dynamics may generate increasing inequality over time. We employ a simulation strategy to analyze the impact of land markets in generating inequality in 13th century landholdings. We find that the dominant factor contributing to the unequal distribution of land was the interaction between emerging land markets and population growth driven by high fertility rates in households with large landholdings.

Scholars historically believed that the market price data reported for Amsterdam markets were spot prices prior to 1747. Neal (The rise of financial capitalism: international capital markets in the Age of Reason. Cambridge University Press, Cambridge, 1990) provided econometric evidence that the prices were time. A newly constructed dataset, containing a much higher frequency of observations from Amsterdam markets, allows us to resolve this dispute. We provide conclusive evidence that the prices report were actually spot, as originally believed.

French stock market volatility observed over the last 150 years presents a huge instability. From a very low level before the First World War, it shows a continuous increase during the inter-war period. Despite peace and economic stability, volatility has never converged to levels seen pre-1914. The level of stock market volatility seems to be linked to the monetary instability and the magnitude of public deficits. Classification JEL : G1, G12, N23, N24.

The French Revolution of 1789 had a momentous impact on neighboring countries. The French Revolutionary armies during the 1790s and later under Napoleon invaded and controlled large parts of Europe. Together with invasion came various radical institutional changes. French invasion removed the legal and economic barriers that had protected the nobility, clergy, guilds, and urban oligarchies and established the principle of equality before the law. The evidence suggests that areas that were occupied by the French and that underwent radical institutional reform experienced more rapid urbanization and economic growth, especially after 1850. There is no evidence of a negative effect of French invasion. Our interpretation is that the Revolution destroyed (the institutional underpinnings of) the power of oligarchies and elites opposed to economic change; combined with the arrival of new economic and industrial opportunities in the second half of the 19th century, this helped pave the way for future economic growth. The evidence does not provide any support for several other views, most notably, that evolved institutions are inherently superior to those 'designed'; that institutions must be 'appropriate' and cannot be 'transplanted'; and that the civil code and other French institutions have adverse economic effects.

During the early 1620's, England went through a period of intense economic disorders which sparked the interest of many in economic reasoning. The decade witnessed the emergence of the most relevant pieces of economic literature of the early Stuart era, but the debate was not restricted to the abstract confrontation of economic writers. The fundamental issue at stake in the controversies between Malynes, Misselden, and Mun - the integration of money and international trade in a coherent explanation of economic phenomena - was also the subject of much care in the public sphere at large. The parliamentary session of 1621, in particular, put in evidence not only the fundamental relevance of the matter for understanding England's economic maladies, but also the great difficulties involved in its investigation. By bringing all these elements together, this paper seeks to articulate a more dense and meaningful portrait of the prevailing state of economic ideas in early 17th century England.

How to implement a mass production when you are a car manufacturer at the beginning of the 20th century? The article illustrates the case of Peugeot, a French car manufacturer, who had to raise new financings between 1919 and 1939 because of the very carefulness of banks. Even if nothing came out of the business relationships established with the Rosengart and Oustric financing houses, they provided nevertheless the basis of the strengthening of the family relationships and of the setting up of a holding company, key to a self-financing strategy. Classification JEL: N23, N64, L62.

Banks and Industry in France and Britain from the 1880s to the Second World War. Most of the comparative studies about the relationships between banking and industry on the long term have been focused on the comparison between Britain and Germany. The discussion concerning the relative efficiency of each financial system vis-à-vis the growth of industry in those countries has often been stated and is relatively well known. To propose another comparison could enlarge the problematic. I propose here a comparative study about the relationships between banking and industry in France and in Britain from the last third of the nineteenth century until World War 2. The reasons of this choice are the following. Firstly the two countries are the first that began to develop industrialization. Secondly, during that long period, their financial systems have known some important alterations. Finally, in going away from a comparison Britain/Germany, often based on a frontal opposition between market-based and bank-based financial systems, I hope to help to lead to a more comprehensive and nuanced appreciation of the realities of the financing of industry and of its problems. Classification JEL : N20, N23., La plupart des études comparatives des rapports entre les banques et l’industrie sur le long terme se sont centrées sur la comparaison entre l’Angleterre et l’Allemagne. La discussion sur l’efficacité relative des systèmes financiers pour la croissance de l’industrie dans ces deux pays a été souvent exposée et est relativement bien documentée. Faire intervenir une autre comparaison peut permettre d’enrichir la problématique. Nous proposons ici une étude comparative sur les relations entre banques et industrie en France et en Angleterre depuis le dernier tiers du XIXe siècle jusqu’à la Seconde Guerre mondiale. Les raisons de ce choix résident dans le fait qu’il s’agit des deux premières puissances à avoir développé leur industrie, ainsi que dans l’existence d’importantes modifications de leurs systèmes financiers dans le temps. Enfin, en s’écartant d’une comparaison Angleterre/ Allemagne souvent basée sur une opposition frontale entre systèmes fondés sur les marchés et systèmes fondés sur les banques, on espère amener à une vision plus nuancée des réalités du financement industriel et de ses problèmes. Classification JEL : N20, N23., Straus André. Banques et industrie en France et en Angleterre : des années 1880 à la Seconde Guerre mondiale. In: Revue d'économie financière, n°104, 2011. Les relations capital et industrie - Capital humain et finance. pp. 35-49.

Les krachs boursiers sont decisifs, car ils representent une part importante de la valeur finale d’un indice boursier. Mais une variation d’un pourcentage identique n’a pas le meme impact dans un environnement financier prealablement stable ou hautement volatile. Pour apprehender les krachs a travers le temps malgre ces changements dans le regime de volatilite, une nouvelle methode est proposee. Chaque variation mensuelle est mesuree en nombre d’ecarts types de la periode precedente. Les pires variations ainsi ajustees designent les krachs. Les resultats obtenus sont plus coherents avec l’histoire financiere. Par exemple, la Premiere Guerre mondiale provoque d’importantes variations de cours ajustees malgre un faible niveau de volatilite anterieure et de faibles variations en pourcentage. La periode recente est plus caracterisee par un niveau eleve de volatilite qu’une epoque de frequents krachs.

In this article, we study Europe's monetary geography on the eve of the Industrial Revolution. Our unit of analysis is the city and we explore inter-city linkages. Important findings include a considerable degree of integration and multilateralism with monetary centres having already emerged as vehicles for international settlements, before the Industrial Revolution. Copyright 2009, Oxford University Press.

The crash of the French stock market in 1882 presented the Paris Bourse with its worst crisis of the nineteenth century. Its structure was similar in key respects to today’s futures markets, with a dominant forward market leading the Bourse to adopt a common fund to guarantee transactions and liquidity. While this mutualization of risk protects clients and brokers from idiosyncratic shocks, it is generally assumed that it also provides considerable protection against systemic shocks, as no twentieth century exchange has been forced to shut down. Using new archival data, this paper shows how a stock market crash overwhelmed the Bourse’s common fund. Only an emergency loan from the Bank of France, intermediated by the largest banks, prevented a closure of the Bourse.

This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare's Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restrictions on short sales or agency problems. Instead, this study demonstrates that predictable investor sentiment can prevent attacks on a bubble; rational investors may attack only when some coordinating event promotes joint action.

Using a new weekly blue-chip index, this paper investigates the causes of stock price movements on the London market between 1823 and 1870. We find that economic fundamentals explain about 15 per cent of weekly and 34 per cent of monthly variation in share prices. Contemporary press reporting from the London Stock Exchange is used to ascertain what market participants thought were causing the largest movements on the market. The vast majority of large movements were attributed by the press to geopolitical, monetary, railway-sector, and financial-crisis news. Investigating the stock price changes on an independent list of events reaffirms these findings, suggesting that the most important specific events which moved markets were wars involving European powers.

Despite its significance in monetary history, the Maria Theresa thaler (or taler) is little known outside numismatic circles. The paper describes this coin’s history, which the paper argues is the reverse to the obverse of the rise of national monies. The coin circulated in Africa, the Levant and Arabia as a full-bodied commodity money until governments one-by-one succeeded in creating acceptable national fiat currencies.

Transport-letters became a popular financial instrument without a use of a physical collateral and financial journalism. How was it possible for a system of salary loans obtained with the trade in the VOC transport-letters based on the intermediation of a secondary market to work sustainably?’. In order to address this issue, several problems need to be investigated. The first sub-question is: ’how was there a primary market for these instruments possible, i.e. how could they create a credible commitment in the eyes of any buyer of a transport-letter? The second sub-question is: ‘how were the asymmetries of information overcome in the secondary market?’. The third sub-question that needs to be answered is about the long-term sustainability of the system: ‘how could the buyers, given the lack of a relevant financial journalism, assess the risk correctly and purchase the instruments at the right price?’. Had it been different, the system would have collapsed as the buyers would have gone bankrupt or the sailors would have not obtained credit at such a high expense. There are many ideas grouped around contract theory and information economics that provide theoretical insights as to how such a system could exist. According to Avner Greif, ‘a possibility of an ex-ante commitment to being able and willing to fulfil contractual obligations ex-post’ is a precondition for any deal to be signed. In his view, institutional developments can explain changes in the markets. This is because they have the power to mitigate the risks and allow debtors to make a credible commitment as perceived by the always sceptical creditors. This article argues that the instrument worked despite the above mentioned problems because: (1) there were institutions mitigating the possible asymmetries of information and risks, allowing the employees to make a credible commitment, as well as allowing the traders to exchange the transport-letters; (2) due to specialisation of the buyers of the transport-letters and their domination in the market, the system was sustainable; despite the lack of financial journalism providing them with a ready information, large portfolios allowed lenders to gain knowledge and assess the risk correctly.