nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2006‒11‒18
twenty papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. The Historical Origins of U.S. Exchange Market Intervention Policy By Michael D. Bordo; Owen Humpage; Anna J. Schwartz
  2. Financial Market Integration Over the Long Run: Is there the U-shape? By Vadym Volosovych
  3. Fiscal Policy in the 1920s and 1930s. How much different it is from the post war period's policies By Matti Virén
  5. Anticipating the Stock Market Crash of 1929: The View from the Floor of the Stock Exchange By Eugene N. White
  6. On the Origins of "A Monetary History" By Hugh Rockoff
  7. Using Markets to Measure Pre-War Threat Assessments: The Nordic Countries facing World War II By Daniel Waldenstrom; Bruno S. Frey
  8. A Comparative Political Approach to the EU Formation By Stefano Bartolini
  9. Stunted and Distorted Industrialization in Myanmar By Kudo, Toshihiro
  10. The Degree of Competition in the Thai Banking Industry before and after the East Asian Crisis By Kubo, Koji
  11. Colonisation and Development in the Former French West Africa: The Long-term Impact of the Colonial Public Policy By Elise Huillery
  12. Was the Wealth of Nations Determined in 1000 B.C.? By Diego Comin; William Easterly; Erick Gong
  13. Indian Patent Policy and Publich Health : implications from the Japanese Experience By Aoki, Reiko; Kubo, Kensuke; Yamane, Hiroko
  15. What About a World Currency? Proposal for a Common Currency among Rich Democracies. One World Money, Then and Now By Richard N. Cooper; Michael Bordo; Harold James
  16. Executive Managers in Large Mexican Family Businesses By Hoshino, Taeko
  17. The Study of International Cultural Relations of Postwar Japan By Aoki-Okabe, Maki; Kawamura, Yoko; Makita, Toichi
  18. Vicious and Virtuous Circles - The Political Economy of Unemployment in Interwar UK and USA By Matthews, Kent; Minford, Patrick; Naraidoo, Ruthira
  19. The short and long-run determinants of the real exchange rate in Mexico By Antonia López Villavicencio; Josep Lluís Raymond Bara
  20. Decomposing the Effects of Financial Liberalization: Crises vs. Growth (March 2006) By Aaron Tornell

  1. By: Michael D. Bordo; Owen Humpage; Anna J. Schwartz
    Abstract: The present set of arrangements for U.S. exchange market intervention policy was largely developed after 1961 during the Bretton Woods era. However, that set had important historical precedents. In this paper we examine precedents to current arrangements, focusing on three historical eras: pre-1934 operations; the Exchange Stabilization Fund operations beginning in 1934; and the Bretton Woods era. We describe operations by the Second Bank of the United States in the pre-Civil War period and then operations by the U.S. Treasury in the post-Civil War period. After establishment of the Federal Reserve in 1914, the New York Fed engaged in isolated exchange market policies in the 1920s and 1930s, first under the direction of the Governor Benjamin Strong until his death in 1928, thereafter, under the direction of his successor, George Harrison. We then examine operations of the Exchange Stabilization Fund that the Gold Reserve Act of 1934 created as a Treasury Department agency. We exploit unique unpublished sources to analyze its dealings with the Banque de France and the Bank of England before and after the Tripartite Agreement. Finally, based on a unique data set of all U.S. Treasury and Federal Reserve foreign-exchange transactions, we discuss U.S. efforts from 1961 through 1972 to defend the dollar's parity under the Bretton Woods system.
    JEL: E42 N10
    Date: 2006–11
  2. By: Vadym Volosovych (Department of Economics, College of Business, Florida Atlantic University)
    Abstract: Financial economists disagree whether the highest degree of financial markets integration had been achieved before World War I, under the Gold Standard, or by the late 20th century. For example, in a series of recent papers, Obstfeld and Taylor investigate empirically the pattern of capital flows over the period from the 1870s till now and provide evidence of a U-shaped trend line in global capital mobility. This paper proposes a systematic methodology to quantify integration and to explore its dynamics utilizing method of principal components. Based on a long series of sovereign bond data for fifteen industrialized economies the paper documents clear evidence of higher financial markets integration at the end of the 20th century compared to the earlier periods. The current trend in integration began after World War II. The overall integration pattern tends to resemble a sloped letter J with a trough as early as the 1920s
    Keywords: financial markets integration, principal components, sovereign bonds
    JEL: F02 F33 F36 G15 N2
    Date: 2005–07
  3. By: Matti Virén
    Abstract: This paper deals with the fiscal behaviour of governments in the 1920s and 1930s. The intention is to see whether there were the same features in government behaviour as in the post-World War II era. In particular, attention is paid to asymmetric fiscal policies, ie the question of whether government deficits react differently to income growth and inflation during depressions and booms. The analysis is carried out using data primarily from the League of Nations. The data come from 32 countries and covers the period 1925?1938. Estimation results suggest the in pre-war period deficits were much less sensitive to output and did not show as many asymmetric features as in post-war period. Otherwise, the same regularities apply to the empirical results. In particular, this is true with the disciplinary role of government debt in terms of budget deficits.
    Keywords: Fiscal policy, deficit, asymmetric behaviour
    JEL: E62 H62
    Date: 2006–11–08
  4. By: Thomas Rawski
    Abstract: During the last four decades of the twentieth century, China`s economy produced a truly remarkable sequence of events. The Great Leap Forward of 1958-60 initiated a twenty-year interlude of widespread hunger and deprivation. Twenty years later, the reform policies of the late 1970s triggered a massive and unexpected economic boom that catapulted hundreds of millions from absolute poverty. This experience raises profound questions about links between culture, institutions and economy, a central focus of C.K. Yang=s distinguished research career.
    Date: 2002–05
  5. By: Eugene N. White
    Abstract: In the months prior to the stock market crash of 1929, the price of a seat on the New York Stock Exchange was abnormally low. Rising stock prices and volume should have driven up seat prices during the boom of 1929; instead there were negative cumulative abnormal returns to seats of approximately 20 percent in the months just before the crash. At the same time, trading nearly ceased in the thin markets for seats on the regional exchanges. Brokers appear thus to have anticipated the October 1929 crash, although investors in the market apparently did not recognize this information.
    JEL: G10 N22
    Date: 2006–11
  6. By: Hugh Rockoff
    Abstract: This paper explores some of the scholarship that influenced Milton Friedman and Anna J. Schwartz's "A Monetary History". It shows that the ideas of several Chicago economists -- Henry Schultz, Henry Simons, Lloyd Mints, and Jacob Viner -- left clear marks. It argues, however, that the most important influence may have been Wesley Clair Mitchell and his classic book "Business Cycles" (1913). Mitchell, and the NBER, provided the methodology for "A Monetary History", in particular the emphasis on compiling long time series of monthly data and analyzing the effects of specific variables on the business cycle. A common methodology and the stability of monetary relationships produced similar conclusions about money. Friedman and Schwartz deemphasized Mitchell's "bank-centric" view of the monetary transmission process, but they reinforced Mitchell's conclusion that money had an independent, predictable, and important influence on the business cycle.
    JEL: B22
    Date: 2006–11
  7. By: Daniel Waldenstrom; Bruno S. Frey
    Abstract: Nordic historians have asserted for a long time that in the Nordic countries only few people, if any, perceived increased threats of war prior to the World War II outbreak. This would explain, and possibly excuse, why their governments did not mobilize their armies until it was too late. This paper questions this established notion by deriving new estimates of widely held war threat assessments from the fluctuations of sovereign market yields collected from all Nordic bond markets at this period. Our results show that the Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings hence question some, but not all, of the standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacit views and opinions of large groups of people in the past.
    Keywords: Structural breaks; Sovereign debt; Capital markets; Historiography; Cliometrics; World War II
    JEL: C22 G14 N01 N44
    Date: 2006–11
  8. By: Stefano Bartolini
    Keywords: polity building; history; integration theory
    Date: 2006–02–17
  9. By: Kudo, Toshihiro
    Abstract: More than 15 years have passed since Myanmar embarked on its transition from a centrally planned economy to a market-oriented one. The purpose of this paper is to provide a bird-eye's view of industrial changes from the 1990s up to 2005. The industrial sector showed a preliminary development in the first half of the 1990s due to an "open door" policy and liberalization measures. However, a brief period of growth failed to effect any changes in the economic fundamentals. The industrial sector still suffers from poor power supplies, limited access to imported raw materials and machinery, exchange rate instability, limited credit, and frequent changes of government regulation. Public ownership is still high in key infrastructure sectors, and has failed to provide sufficient services to private industries. What the government must do first is to get the fundamentals right.
    Keywords: Myanmar (Burma), Transitional economy, Industry, Industrialization, Industrial policy, Transition to market economy
    JEL: L60 O14 P20
    Date: 2006–10
  10. By: Kubo, Koji
    Abstract: This paper analyzes the influence of the East Asian crisis and the subsequent reforms on the oligopolistic nature of the Thai banking industry. Since the crisis, there have been substantial changes in competitive environment, including a decline in the family ownership of banks as well as the arrival of new entrants. How did these changes affect a banking industry in which the six largest local banks accounted for over 70 percent of market share? The estimated Lerner index from Bresnahan's [1989] conjectural variation model indicates the possibility of a decline in the degree of competition.
    Keywords: Thai banking industry, Degree of competition, Lerner index, Banks, Financial crises, Thailand
    JEL: L13 G21
    Date: 2006–03
  11. By: Elise Huillery (Paris Jourdan Sciences Economiques (PSE), DIAL, Paris)
    Abstract: (english) To what extent did the colonial public policy influence the current regional inequalities in the Frenchspeaking West Africa? This paper uses the differences in development outcomes across the areas of the former French West Africa to show the existence of colonial long term effects on development paths. To correct from potential biases, I take carefully into account the geographical and pre-colonial characteristics of the districts and use the spatial discontinuities of the colonial public policy to control for unobservable districts’ characteristics. Results show that colonial history is a strong determinant of current development of the districts of the former French West Africa. First, the African chiefs’ association to the colonial administration played a discriminating role between districts but its effects are ambiguous, positive on educational performances and negative on the health performances. Secondly, the colonial public investments in education, health and public works explain much of the current regional development inequalities. The nature of the public investment also matters: each type of current performance has been specifically determined by the corresponding colonial investment. The colonial public policies had thus very persistent effects and played a strong spatial discriminating role. _________________________________ (français) Dans quelle mesure les inégalités spatiales en Afrique de l’Ouest francophone ont-elles été influencées par la politique publique menée par les Français pendant la période coloniale ? Ce papier utilise les différences de développement entre les cercles de l’ancienne Afrique Occidentale Française (AOF) pour mettre en évidence des effets de long terme de la colonisation sur les trajectoires de développement. Les caractéristiques géographiques ainsi que l’histoire précoloniale des cercles ont été prises en compte pour corriger l’éventuelle endogénéité de la politique coloniale. J’utilise ensuite les discontinuités spatiales de la politique coloniale pour contrôler également certaines caractéristiques inobservables des cercles. Les résultats montrent que l’histoire coloniale fut un déterminant important du développement des cercles de l’ancienne AOF. La première source de discrimination spatiale fut la politique d’association des chefs africains dans l’administration coloniale, mais son effet reste ambigu : elle a joué positivement sur les performances éducatives mais négativement sur les performances de santé. La deuxième source de discrimination entre les cercles, plus importante que la première, fut la politique d’investissement en biens publics (éducation, santé, infrastructures), qui explique une part importante des inégalités de développement actuelles entre les cercles. On observe enfin que la nature des investissements importe, même à long terme : les performances actuelles dans les domaines de l’éducation, de la santé et des infrastructures sont chacune spécifiquement expliquées par l’investissement colonial « correspondant ». La politique coloniale française a donc créé des discriminations spatiales très persistantes dont les marques sont encore nettement visibles aujourd’hui.
    Keywords: Colonisation, West Africa, Spatial inequalities, Development, Public goods,Public policy, Colonisation, Afrique de l’Ouest, Inégalités spatiales, Développement, Biens publics,Politique publique.
    JEL: I18 I28 N47 O11 O15 O18 P16 R12
    Date: 2006–07
  12. By: Diego Comin; William Easterly; Erick Gong
    Abstract: We assemble a dataset on technology adoption in 1000 B.C., 0 A.D., and 1500 A.D. for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Although our strongest results are for 1500 A.D., we find that even technology as old as 1000 BC matters in some plausible specifications.
    JEL: N7 O3
    Date: 2006–10
  13. By: Aoki, Reiko; Kubo, Kensuke; Yamane, Hiroko
    Abstract: The introduction of pharmaceutical product patents in India and other developing countries is expected to have a significant effect on public health and local pharmaceutical industries. This paper drawsimplications from the historical experience of Japan when it introduced product patents in 1976. In Japan, narrow patents and promotion of cross-licensing were effective tools to keep drug prices in check while ensuring the introduction of new drugs. While the global pharmaceutical market surrounding India today differs considerably from that of the 1970's, the Japanese experience offers a policy option that may profitably be considered by India today. The Indian patent system emphasizes the patentability requirement in contrast to the Japanese patent policy which relied on narrow patents and extensive licensing. R&D by local firms and the development of local products may be promoted more effectively under the Japanese model.
    Keywords: Pharmaceutical industry, Industrial policy, Intellectual property rights, Patent law, Public health, Industrial property law, India, Japan
    JEL: I11 I18 L50 L65 O10 O31 O34
    Date: 2006–03
  14. By: Thomas Rawski
    Date: 2006–10
  15. By: Richard N. Cooper (Harvard University); Michael Bordo (Economics Department, Rutgers University and Harvard University); Harold James (History Department and Woodrow Wilson School, Princeton University)
    Keywords: Regional and International Currency Arrangements
    JEL: F41 F15 F33
    Date: 2006–06
  16. By: Hoshino, Taeko
    Abstract: The involvement of members of owners' families in the running of large family businesses in Mexico is decreasing. Although family members still hold key posts such as that of CEO, other executive posts tend to be delegated to professional salaried managers. Top managers, including family members, share some common characteristics. They are young compared with managers in other developed countries, their quality as human resources is high, and many of them are graduates of overseas MBA courses. Most of them are sufficiently experienced. Improvement of quality among top managers is a recent phenomenon in Mexico, and has been encouraged mainly by the following two factors. First, globalization of business activities was promoted by intense competition among firms under conditions of market liberalization. In order to equip themselves with the ability to cope with the globalization of their operations, large family businesses tried hard to improve the quality of top management, by training and educating existing managers, and/or by recruiting managers in the outside labor market. Second, developments in the Mexican economy during the 1990s led to a growth in the labor market for top managers Thus, business restructuring caused by bankruptcy, as well as mergers and acquisitions, privatization and so on, led to the dismissal of business managers who then entered the labor market in large numbers. The increasing presence of these managers in the labor market helped family businesses to recruit well-qualified senior executives.
    Keywords: Family business, Ownership, Management, Managers, Mexico, Family concern, Large-scale enterprises, Industrial management
    JEL: K22 L22 M12 M13
    Date: 2006–10
  17. By: Aoki-Okabe, Maki; Kawamura, Yoko; Makita, Toichi
    Keywords: International relations, Cultural Turn, International cultural exchange, Identity, Civil society, Japan, Germany
    JEL: Z00
    Date: 2006–02
  18. By: Matthews, Kent (Cardiff Business School); Minford, Patrick (Cardiff Business School); Naraidoo, Ruthira
    Abstract: This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment. This model is applied to the UK and the US interwar period which is remembered as the decade of mass unemployment. The theory here sees the natural rate and the associated path of unemployment as a reaction to shocks (mainly demand in nature) and the institutional structure of the economy. The channel through which these two forces feed on each other is a political economy process whereby voters with limited information on the natural rate react to shocks by demanding more or less social protection. The reduced form results obtained confirm a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks.
    Keywords: Equilibrium unemployment; political economy; 'vicious' and 'virtuous' circles; bootstrapping
    JEL: E24 E27 P16
    Date: 2006–01
  19. By: Antonia López Villavicencio (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Josep Lluís Raymond Bara (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper explores the real exchange rate behavior in Mexico from 1960 until 2005. Since the empirical analysis reveals that the real exchange rate is not mean reverting, we propose that economic fundamental variables affect its evolution in the long-run. Therefore, based on equilibrium exchange rate paradigms, we propose a simple model of real exchange rate determination which includes the relative labor productivity, the real interest rates and the net foreign assets over a long period of time. Our analysis also considers the dynamic adjustment in response to shocks through impulse response functions derived from the multivariate VAR model.
    Keywords: real exchange rate, purchasing power parity, Balassa-Samuelson effect, error correction models, bounds cointegration test.
    JEL: C32 F31 F41 F49
    Date: 2006–10
  20. By: Aaron Tornell

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