Money Dynamics with Multiple Banks of Issue: Evidence from Spain 1856-1874

40 Pages Posted: 1 Sep 2011

See all articles by Galo Nuño

Galo Nuño

Banco de España

Pedro Tedde de Lorca

Banco de España - Department of International Economics & International Relations

Alessio Moro

University of Cagliari

Date Written: September 1, 2011

Abstract

This paper analyzes the Spanish monetary system from 1856, when the Bank of Spain was created, to 1874, when it was awarded the monopoly of emission. This period was characterized by the emergence of an unregulated banking system, with multiple banks of issue entitled to emit bank notes. We focus on two main issues: i) the large fluctuations in the money supply during this period; and ii) the lack of a lender of last resort in the banking panic of 1866. To analyze this, we construct a new dataset on money supply aggregates. The paper also estimates the economic impact of monetary fluctuations with the help of a calibrated new Keynesian model. Our results suggest that money supply shocks had a milder effect on inflation and output than the one predicted by the theory.

Keywords: unregulated banking, Gresham’s law, lender of last resort, Overend and Gurney crisis

JEL Classification: N13, N23, E31, E5

Suggested Citation

Nuno, Galo and de Lorca, Pedro Tedde and Moro, Alessio, Money Dynamics with Multiple Banks of Issue: Evidence from Spain 1856-1874 (September 1, 2011). Banco de Espana Working Paper No. 1119. Available at SSRN: https://ssrn.com/abstract=1920671 or http://dx.doi.org/10.2139/ssrn.1920671

Galo Nuno (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Pedro Tedde De Lorca

Banco de España - Department of International Economics & International Relations ( email )

Alcala 50
Madrid, 28014
Spain

Alessio Moro

University of Cagliari ( email )

Via S.Ignazio 17
Cagliari
Italy

HOME PAGE: http://economia.unica.it/deca/

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