Monetary Policy and Regional Interest Rates in the United States, 1880-2002 / John Landon-Lane, Hugh Rockoff.

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Landon-Lane, John

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10924.Publication details: Cambridge, Mass. National Bureau of Economic Research 2004.Description: 1 online resource: illustrations (black and white)Subject(s):

N1 - Macroeconomics and Monetary Economics • Industrial Structure • Growth • Fluctuations

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Abstract: The long running debate among economic historians over how long it took regional financial markets in the United States to become fully integrated should be of considerable interest to students of monetary unions. This paper reviews the debate, discusses the implications of various hypotheses for the optimality of the US monetary union, and presents some new findings on the origin and diffusion of monetary shocks. It appears that financial markets were integrated in the late nineteenth and early twentieth centuries in the sense that monetary shocks were routinely transmitted from one part of the United States to another. In particular, shocks to interest rates in the eastern financial centers were routinely transmitted to the periphery. However, it also appears that during this period significant shocks to bank lending rates in the periphery often arose on the periphery itself. This suggests that a nineteenth century monetary authority that relied on operations confined to eastern financial centers would have had a difficult time managing the U.S. monetary union. After World War II the problem of eruptions on the periphery declined.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w10924 (Browse shelf(Opens below))	Not For Loan

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November 2004.

The long running debate among economic historians over how long it took regional financial markets in the United States to become fully integrated should be of considerable interest to students of monetary unions. This paper reviews the debate, discusses the implications of various hypotheses for the optimality of the US monetary union, and presents some new findings on the origin and diffusion of monetary shocks. It appears that financial markets were integrated in the late nineteenth and early twentieth centuries in the sense that monetary shocks were routinely transmitted from one part of the United States to another. In particular, shocks to interest rates in the eastern financial centers were routinely transmitted to the periphery. However, it also appears that during this period significant shocks to bank lending rates in the periphery often arose on the periphery itself. This suggests that a nineteenth century monetary authority that relied on operations confined to eastern financial centers would have had a difficult time managing the U.S. monetary union. After World War II the problem of eruptions on the periphery declined.