Multi-currency regime and markets in early nineteenth-century Finland
Voutilainen, M., Turunen, R., & Ojala, J. (2020). Multi-currency regime and markets in early nineteenth-century Finland. Financial History Review, 27(1), 115-138. https://doi.org/10.1017/S0968565019000210
Published inFinancial History Review
© The Author(s), 2019. Published by Cambridge University Press on behalf of the European Association for Banking and Financial History.
Pre-industrial money supply typically consisted of multiple, often foreign currencies. Standard economic theory implies that this entails welfare loss due to transaction costs imposed by currency exchange. Through a study of novel data on Finnish nineteenth-century parish-level currency conditions, we show that individual currencies had principal areas of circulation, with extensive co-circulation restricted to the boundary regions in between. We show that trade networks, defined here through the regional co-movement of grain prices, proved crucial in determining the currency used. Market institutions and standard price mechanisms had an apparent role in the spread of different currencies and in determining the dominant currency in a given region. Our findings provide a caveat for the widely held assumption that associates multi-currency systems with negative trade externalities.
PublisherCambridge University Press
Publication in research information system
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Related funder(s)OP Group Research Foundation; Academy of Finland
Funding program(s)Foundation; Academy Project, AoF
Additional information about fundingMiikka Voutilainen acknowledges financial support from OP Group Research Foundation grants 20170130, 20180071 and 20190117, and he warmly thanks Professor Gregory Clark and the All-UC Group in Economic History for the research visit to UC Davis in 2018. The authors acknowledge financial support from the Academy of Finland grant 308975.
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