Monetary Union, Institutions and Financial Market Integration, Italy 1862-1905

30 Pages Posted: 22 May 2003

See all articles by Gianni Toniolo

Gianni Toniolo

University of Rome Tor Vergata - Faculty of Economics; Centre for Economic Policy Research (CEPR); Duke University - Department of Economics

Leandro Conte

University of Siena - Department of Economics

Giovanni Vecchi

University of Rome Tor Vergata - Faculty of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2003

Abstract

The Paper draws its motivation from the observation that, three years into the single currency, EMU financial markets are making only slow progress towards integration and from the belief that economic history can offer useful insights as to the causes of the phenomenon. In this vein, we investigate a previous case of financial market integration in the wake of monetary unification, that of Italy after 1862. We find that the prices of the Rendita Italiana 5% (Italian Consols) across regional stock exchanges did not fully converge until 1887, 25 years after the creation of a 'monetary union' in the peninsula. Regression analysis shows that variables such as the spread of ICT, trade volumes and the diffusion of the 'single currency' fail to explain the delay in financial market unification. We argue that markets remained relatively fragmented because local vested interests resisted the legal and regulatory changes needed to make arbitrage across individual stock exchanges efficient. A single Italian financial market appeared only when the State imposed more uniform financial market legislation nationwide, a fact that the EU should perhaps not overlook.

Keywords: financial market integration, monetary union, nineteenth-century Italy and vested interests

JEL Classification: E34, E44, N23

Suggested Citation

Toniolo, Gianni and Conte, Leandro and Vecchi, Giovanni, Monetary Union, Institutions and Financial Market Integration, Italy 1862-1905 (March 2003). CEIS Tor Vergata - Research Paper Series No. 16, Available at SSRN: https://ssrn.com/abstract=406120 or http://dx.doi.org/10.2139/ssrn.406120

Gianni Toniolo (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy
+39 06 7259 5734 (Phone)
+39 06 202 0500 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Leandro Conte

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
+39 05 7723 2539 (Phone)
+39 05 7723 2661 (Fax)

Giovanni Vecchi

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy
+39 6 7259 5730 (Phone)
+39 6 2020 500 (Fax)

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