Meir Kohn

Bills of Exchange and the Money Market to 1600

This paper describes the evolution of the bill of exchange in medieval and early modern Europe both as a means of remittance and as an instrument of credit. It examines the evolution of the instrument, its use in remittance, its effect on international bullion flows, and its use as an instrument of credit. The paper also describes the international network of exchange markets on which the use of the bill of exchange relied. The paper concludes with a discussion of the emergence of negotiability in Antwerp in response to problems in the system of settlement. An Appendix describes the determination of exchange rates in this period.

The Implications of Knowledge-Based Growth for the Optimality of Open Capital Markets

This paper reexamines the view that opening capital markets must have long-run benefits. The analysis shows that the desirability of opening a countrys capital markets depends on the nature of the technology assumed. Models of knowledge-based growth predict that changes that alter the economys level of production will also affect the economys growth rate and hence the welfare of future generations. Standard neoclassical growth models imply no such effects on growth or welfare. If production does involve an important element of learning by doing, inference from the standard models may be seriously misleading. In particular, opening capital markets does not necessarily improve welfare for the nation or for the world as a whole.

Medieval and Early Modern Coinage and Its Problems

This paper describes the chaotic monetary environment of medieval and early modern Europe. The poor quality of the coinage was a result both of problems with the supply of bullion and with deficiencies of monetary policy. The paper examines the supply and demand of bullion and the determinants of bullion flows. It then discusses the economics and politics of debasement. It concludes with a description of how commerce adapted to this inhospitable monetary environment.

Merchant Associations in Pre-Industrial Europe

In pre-industrial Europe, many of the functions performed today by large corporations and governments were performed by merchant associations of various types - merchant guilds, regulated companies, merchant-controlled cities, and merchant colonies. Merchant association provided their members with protection and order, represented them in the rivalry for trade, and helped them overcome the problems of agency and financing. This paper examines the nature, function, and evolution of merchant associations.

The Expansion of Trade and the Transformation of Agriculture in Pre-Industrial Europe

The expansion of trade in pre-industrial Europe led to a transformation of agriculture. It induced specialization to exploit comparative advantage as well as a restructuring of the process of production, with manorial agriculture giving way to an agriculture of family farms. Technological progress was not itself a driving force, but rather a consequence of this transformation. Merchants and urban investors played a central role in the transformation of agriculture. They purchased land and restructured it into family farms. They pioneered new forms of land tenure. They were active in developing new agricultural land. And it was their efforts in lowering trading costs that made possible the expansion of trade that was the cause of it all.

Trading Costs and the Pattern of Trade in Pre-Industrial Europe

The development of pre-industrial Europe was driven by the expansion of trade. This paper describes the patterns of trade and shows how they can be understood in terms of differences in trading costs. It discusses how the different levels of trade?from local to transoceanic-contributed, both quantitatively and qualitatively, to the process of growth.

The Expansion of Trade and the Development of European Industry to 1600

This paper describes the industrial development of Europe to 1600. The conventional history of industrial development sees technological progress as its primary cause. However, this paper argues that the source of rising productivity was not new technology but the reorganization of production in response to falling trading costs and the expansion of trade. The expansion of trade changed which goods were produced, where they were produced, and by inducing an increasing division of labor, how they were produced. Of course, technological progress did contribute to rising productivity. However, it was less an independent cause than a consequence of industrial reorganization, expanding trade, and falling trading costs.

International evidence on misspecification of the standard money demand equation

Abstract This paper tests the proposition that the interest rate in the standard money demand equation acts as a proxy for the expected change in interest rates. If this is true, the interest elasticity in the standard equation will depend on the expectations process for interest rates. Using cross-country data, we find that there does exist a relationship between the observed interest elasticity in the standard equation and the predictability of future interest rates from current interest rates.

Organized Markets in Pre-Industrial Europe

Pre-industrial Europe was served by a network of market centers - market towns, fairs, and commercial cities. Within these centers, there were organized markets that lowered the cost of trading. An organized market provided traders with information, facilities for trading, a system of settlement, and a process of dispute resolution (the law merchant). This paper examines how these markets worked, how they were regulated, and how they evolved to meet the changing needs of the economy.

Trading Costs, The Expansion Of Trade And Economic Growth In Pre-Industrial Europe

In pre-industrial Europe, growth was driven by the expansion of trade, and the expansion of trade was driven by falling trading costs. This paper discusses the mechanisms linking these processes: profit-seeking behavior by merchants, changes in the organization of production, technological progress, and urbanization. It then reviews the fluctuations in European economic growth between 1000 and 1600 and argues that these can best be understood in terms of changing trading costs.