Vincent Bignon

The Economics of Badmouthing: Libel Law and the Underworld of the Financial Press in France before World War I

This article analyzes the economics of “badmouthing” in the context of the pre-1914 French capital market. We argue that badmouthing was a means through which racketeering journals sought to secure property rights over issuers’ reputation. We provide a theoretical study of the market setup that emerged to deal with such problems, and we test our predictions using new evidence from contemporary sources.

Stealing to Survive: Crime and Income Shocks in 19th Century France

Using local administrative data from 1826 to 1936, we document the evolution of crime rates in 19th century France and we estimate the impact of a negative income shock on crime. Our identification strategy exploits the phylloxera crisis. Between 1863 and 1890, phylloxera destroyed about 40% of French vineyards. We use the geographical variation in the timing of this shock to identify its impact on property and violent crime rates, as well as minor offences. Our estimates suggest that the phylloxera crisis caused a substantial increase in property crime rates and a significant decrease in violent crimes.

Big Push or Big Grab? Railways, Government Activism, and Export Growth in Latin America, 1865–1913

Railways were one of the main engines of the Latin American trade boom before 1914. Railway construction often required financial support from local governments, which depended on their fiscal capacity. But since the main government revenues were trade-related, this generated a two-way feedback between government revenues and railways with a potential for multiple equilibria. The empirical tests in this paper support the hypothesis of a positive two-way relationship. The main implication of our analysis is that the build-up of state capacity was a necessary condition for railway expansion and, given the importance of the export sector in these economies, for economic growth and divergence in the region.

Coin Assaying and Commodity Money

When money was made of gold and silver, individuals faced the problem of determining the intrinsic content of coins in many exchange situations. In this paper we look at a well-documented solution to this problem, and a key institution of the commodity money system: coin assaying. To that goal we build a model of search and matching in which agents trade using coins that are imperfectly recognizable, but have access to a coin inspection technology that reveals the intrinsic content of coins for a fee. We consider two sources of imperfect information: counterfeit coins and clipping. With counterfeits we show that coin assaying reduced the extent of inefficiencies associated with imperfect coins recognizability (namely lower traded quantities and lower trading frequencies). Yet it did not necessarily increase welfare because it unmasked counterfeits which then traded at a discount, reducing total output. With clipping, we show that agents clip for two reasons: in the hope of passing an inferior coin for a superior one, and to reduce the purchasing power of coins that are too valuable. While coin assaying could remove the first type of clipping, it had no effect on the second. While framed in the context of the commodity money system, our analysis relates to the more general issue of asset trading under imperfect information.

The Price of Media Capture and the Debasement of the French Newspaper Industry During the Interwar

Measurement of the value of “media capture†(the control of newspapers by business or political interests) is difficult. However, if capture is valuable, it should affect the price of newspaper shares. Useful information about the value of media capture should be retrievable from Stock Exchange data. Interwar France provides a unique setting to implement this idea because key newspapers floated voting and nonvoting stocks. Combined with takeover prices, data yield estimates of the price of media capture and of the time-series evolution of this price. Comparison with Britain sheds new light on a dark episode of French history.

Currency Union with and without Banking Union

This paper analyzes a two-country model of currency, banks and endogenous default to study whether impediments to credit market integration across jurisdictions impact the desirability of a currency union. We show that when those impediments induce a higher cost for banks to manage cross-border credit compared to domestic credit, welfare may not be maximal under a regime of currency union. But a banking union that would suppress hurdles to banking integration restores the optimality of that currency arrangement. The empirical and policy implications in terms of banking union are discussed.

Monetary Union with a Single Currency and Imperfect Credit Market Integration

With the Euro Area context in mind, we show that currency arrangements impact on credit available through default incentives. To this end we build a symmetric two-country model with money and imperfect credit market integration. Differences in credit market integration are captured by variations in the cost for banks to grant credit for cross-border purchases. We show that for high enough levels of this cost, currency integration may magnify default incentives, leading to more stringent credit rationing and lower welfare than in a regime of two currencies. The integration of credit markets restores the optimality of the currency union.

CURRENCY UNION WITH OR WITHOUT BANKING UNION: CURRENCY UNION WITH OR WITHOUT BANKING UNION

We build a symmetric two‐country monetary model with credit to study the interplay between currency integration and credit markets integration. The currency arrangement affects credit availability through default incentives. We capture credit markets integration by the extra cost incurred to obtain credit for cross‐border transactions and, with the euro area context in mind, label as banking union a situation where this cost is low. For high levels of the cross‐border credit cost, currency integration may magnify default incentives, leading to more credit rationing and lower welfare. The integration of credit markets restores the optimality of the currency union.

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.

Illiquid Collateral and Bank Lending during the European Sovereign Debt Crisis

This paper assesses the effect on banks’ lending activity of accepting illiquid collateral at the central bank refinancing facility in times of wholesale funding stress. We exploit original data on the loans granted by the 177 largest euro area banks between 2011m1 and 2014m12 and on the composition of their pool of collateral pledged with the Eurosystem. During this period, two-thirds of the banks in our sample experienced a sizable loss of wholesale funding. Panel regression estimates show that the banks that pledged more illiquid collateral with the Eurosystem reduced their lending to non-financial firms and households less: a one standard deviation increase in the volume of illiquid collateral pledged corresponded to a 0.6% increase in loans to the economy. This result holds for banks that were and were not run. Our finding thus suggests that the broad range of collateral eligible in the euro area may have helped to mitigate the credit crunch during the euro debt crisis.