SSE/EFI Working Paper Series in Economics and Finance
No 540:
Commercial Note Issuing Banks and Capital Market Development: An Empirical Test of the Enskilda Banks’ Assets, Liabilities and Reserves in Relation to Evolving Capital Market Liquidity in Sweden, 1834 – 1913
Anders Ögren ()
Abstract: First established during the 1830's, the Enskilda banks
were characterized by unlimited owner liability and the right to issue bank
notes. Consequently, in Swedish banking history, these banks have been
considered to be primitive relics. This paper utilizes new data to revise
this picture of the Enskilda banks. Applying Douglas W. Diamond’s model
(1997) of the cumulative contribution of banks to the creation of liquid
asset markets in developing economies to the capital poor country of
Sweden, indicates that the Enskilda banks made a contribution out of the
reach of non-note issuing banks. In view of the crucial role of the
Enskilda banks, the Banking Act of 1864, which effectively permitted the
free establishment of such banks, must be judged to have been the most
important institutional change facilitating the development of the Swedish
credit market.
Keywords: Banking Fragility; Capital Market Development; Classical Silver and Gold Standards; Fractional Reserves; Free Banking; Liquidity; (follow links to similar papers)
JEL-Codes: E40; G21; N13; N23; (follow links to similar papers)
39 pages, October 15, 2003
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