nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2006‒06‒17
two papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. The Quiet Transport Revolution: Returns to scale, scope and network density in Norway's nineteenth-century sailing fleet By Camilla Brautaset; Regina Grafe
  2. Currency Mismatches, Default Risk, and Exchange Rate Depreciation: Evidence from the End of Bimetallism By Michael D. Bordo; Christopher M. Meissner; Marc D. Weidenmier

  1. By: Camilla Brautaset (University of Bergen and BHU, LSE); Regina Grafe (Nuffield College, Oxford)
    Abstract: Interpreting the role of expanding transport in overall production growth in the nineteenth century is still hampered by our lack of understanding of how much and when ocean shipping costs began to fall. This paper exploits new output and freight rate data for one of the world’s largest merchant fleets, the Norwegian, 1830–66. We argue that the price of an average shipped ton-mile was subject to three sources of returns to scale. We test for the impact of a changing composition of produced output (the ‘composition effect’) to account for economies of scope and offer an alternative index for the price of the average ton-mile that shows a strongly falling trend for the entire period. We then turn to the effect that increasing maturity of new routes had on prices, thus analysing returns to an increased network density finding strong evidence for their existence. Finally, we investigate the importance of internal scale economies in firm and ship size based on a cost survey conducted in 1867–70.
    JEL: N70 F02 R40
    Date: 2006–06–09
  2. By: Michael D. Bordo; Christopher M. Meissner; Marc D. Weidenmier
    Abstract: It is generally very difficult to measure the effects of a currency depreciation on a country’s balance sheet and financing costs given the endogenous properties of the exchange rate. History provides at least one natural experiment to test whether an exogenous exchange rate depreciation can be contractionary (via an increased real debt burden) or expansionary (via an improved current account). France’s decision to suspend the free coinage of silver in 1876 played a paramount role in causing a large exogenous depreciation of the nominal exchange rates of all silver standard countries versus gold-backed currencies such as the British pound—the currency in which much of their debt was payable. Our identifying assumption is that France’s decision to end bimetallism was exogenous from the viewpoint of countries on the silver standard. To deal with heterogeneity we implement a difference in differences estimator. Sovereign yield spreads for countries on the silver standard increased in proportion to the potential currency mismatch. Yield spreads for silver countries increased ten to fifteen percent in the wake of the depreciation. Basic growth models suggest that the accompanying reduction in investment could have decreased output per capita by between one and four percent relative to the pre-shock trajectory. This also illustrates that a substantial proportion of the decrease in spreads gold standard countries identified in the “Good Housekeeping” literature could be attributable to the increase in exchange rate stability. Finally, if emerging markets are going to embrace international capital flows, the most export oriented countries will manage to mitigate the negative effects of a currency mismatch.
    JEL: N1 N2 F3
    Date: 2006–06

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