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Interregional Financial Intergration and the Banknote Market: The Old Northwest, 1815–1845

Published online by Cambridge University Press:  03 March 2009

Jane Knodell
Jane Knodell
Affiliation:
Professor of Economics at the University of Vermont, 479 Main Street, Burlington, VT 05405.
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Abstract

I study the changing role of the banknote market in interregional financial arrangements of the antebellum American economy, using the Old Northwest as a case study. On the basis of a comparative analysis of the cyclical behavior of the banknote market, I conclude that the role of the banknote market in interregional balance of payments adjustments declined as the Old Northwest became more closely integrated into the external financial system.

Type
Papers Presented at the Forty-Seventh Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 48 , Issue 2 , June 1988 , pp. 287 - 298
Copyright
Copyright © The Economic History Association 1988

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References

1 Davis, Lance, “The Investment Market, 1870–1914: The Evolution of a National Market,” this JOURNAL, 25 (09 1965), pp. 355–93.Google Scholar

2 The macrodynamics are discussed more fully in Knodell, Jane, “Financial Structure and Financial Stability: The American West, 1800–45” (Ph.D. dissertation, Stanford University, 1984), pp. 145–53, 190–98, 285–304, 349–56.Google Scholar

3 Dewey, Davis R., State Banking before the Civil War (Washington, D. C., 1910).Google Scholar

4 These are patterns immediately observable from eye-balling the following system-wide banknote discount rate data: Van Court's Philadelphia Reporter, 1839–1844; William Gouge, The Journal of Banking, p. 363 (covers 1814–1841); and Willis & Co., Bank Note List and Counterfeit Detector, 1843–1854. The first two present discount rates quoted in the Philadelphia market; the latter, Boston. While this method is inadequate as a scientific description of the delineation of currency areas, it is suitable for the more limited purposes of this paper.Google Scholar

5 Court, Van, Philadelphia Reporter; Willis, Bank Note List.Google Scholar

6 Pred, Allen, Urban Growth and the Circulation of Information: The United States System of Cities, 1790–1840 (Cambridge, Mass., 1973), chap. 2. Of particular interest are the maps on pp. 44–45 and 51–53 showing mean public-information time lags for Philadelphia and New York in 1817 and for Philadelphia, New York, and Boston in 1841.Google Scholar

7 This discussion draws heavily on Kaldor, Nicholas, “Speculation and Economic Stability,” Review of Economic Studies, 7 (10 1939), pp. 1–27.CrossRefGoogle Scholar

8 Berry, Thomas, Western Prices before 1861 (Cambridge, Mass., 1943), pp. 385–404;Google ScholarGolembe, Carter, “State Banks and the Economic Development of the West, 1830–1844” (Ph.D. dissertation, Columbia University, 1952), pp. 249, 258, 276–77.Google Scholar

9 I am indebted to David Meyer for this perceptive observation.Google Scholar

10 Interestingly, New York bankers and financiers were actively involved in both processes of financial innovation.Google Scholar

11 Myers, Margaret, The New York Money Market: Origins and Development (New York, 1931), pp. 108–9;Google ScholarCourt, Van, Philadelphia Reporter.Google Scholar