Clemens Jobst

The Empirics of International Currencies: Network Externalities, History and Persistence*

Using a new database for the late nineteenth century, when the pound sterling was the worlds leading international currency, this article provides evidence on the empirical determinants of international currency status. We report evidence in favour of the search-theoretic models to international currencies. Using a microeconomic model of currency choice, we provide empirical support to strategic externalities. We find strong confirmation of the existence of persistence, but reject the view that the international monetary system was subject to pure path dependency and lock-in effects, suggesting that, even in the absence of WWI, the USD was bound to overtake sterling.

The coevolution of money markets and monetary policy, 1815-2008

Money market structures shape monetary policy design, but the way central banks perform their operations also has an impact on the evolution of money markets. This is important, because microeconomic differences in the way the same macroeconomic policy is implemented may be non-neutral. In this paper, we take a panel approach in order to investigate both directions of causality. Thanks to three newly-collected datasets covering ten countries over two centuries, we ask (1) where, (2) how, and (3) with what results interaction between money markets and central banks has taken place. Our findings allow establishing a periodization singling out phases of convergence and divergence. They also suggest that exogenous factors – by changing both money market structures and monetary policy targets – may impact coevolution from both directions. This makes sensible theoretical treatment of the interaction between central bank policy and market structures a particularly complex endeavor.

Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th century France

This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-in-differences panel regressions and emulate crises by studying how defaults of banks and non-agricultural firms were affected by the arrival of an agricultural disease. We exploit the specificities of the implementation of the discount window to deal with the endogeneity of the access to the central bank to the arrival of the crisis and local default rates. We find that broad eligibility reduced significantly the increase in the default rate when the shock hit the local economy. A counterfactual exercise shows that defaults would have been 10% to 15% higher if the central bank would have implemented the strictest eligibility rule. This effect is identified independently of changes in policy interest rates and the fiscal deficit.

Introduction to the special issue on the financial and monetary history of South-East Europe

The interlinkages of financial institutions and the state in South-East Europe are at the core of the three articles which build this special issue of the Financial History Review. The articles were presented at the th conference of the South-East European Monetary History Network on ‘Financial development and economic growth in South-East Europe – a historical and comparative perspective’, which was jointly organized by the Oesterreichische Nationalbank and the University of Vienna in September . In addition to being selected and commented on by the organizers of the conference, the articles underwent the journal’s standard refereeing process. In the first article, Matthias Morys provides a cross-country analysis of monetary reform in four countries that became autonomous within and later independent from the Ottoman Empire during the nineteenth century. The central question of the article is why the establishment of a national monetary system including national coinage and a central bank came relatively late in the process of state formation, at times not until several decades after independence. To understand the process, Morys suggests an innovative approach, i.e. a concept of successive stages of monetary reform. He identifies five stages of monetary reform followed by all four countries: first, enactment of a national budget, followed by a Coinage Act, the issue of government bonds, the foundation of a national bank of issue and – finally – convergence to the gold standard. Future research could use this concept to examine whether other emerging financial systems followed a similar path. Turning to the empirical results, Morys argues that from the viewpoint of the newly independent countries the establishment of a unified national currency was not necessary, at least not immediately, as fiscal reforms could be implemented and foreign lending obtained without the costly implementation of national coinage and establishment of a central bank. As a result, both reforms were undertaken relatively late and only when it became clear that they would help manage national debt and support the financial development of the private sector, as the banks of issue in all four countries not only served as monetary authorities but played an important role as commercial lenders and lenders to the government as well.