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Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks

Published online by Cambridge University Press:  07 September 2006

Manfred Neldner
Manfred Neldner
Affiliation:
Universität Osnabrück, Rolandstraße 8, D-49069 Osnabrück, Germany
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Abstract

Free banking in Switzerland lasted from 1826 to 1907. Although the system was reasonably successful, the Swiss experience has been almost entirely neglected in the debate over free banking. In its more advanced state of development, the stability of the Swiss free banking system deteriorated, since (1) all assumptions underlying the so-called law of adverse clearings were more or less violated, and (2) the note-issuing banks were prevented by their non-issuing rivals from increasing their discount rates, even if some of them were faced with heavy losses of specie. In 1907, therefore, free banking had to be abandoned.

Type
Articles
Information
European Review of Economic History , Volume 2 , Issue 3 , December 1998 , pp. 289 - 308
Copyright
Cambridge University Press 1998

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