New Economics Papers
on Business, Economic and Financial History
Issue of 2008‒11‒11
fourteen papers chosen by

  1. Monetary Policy Objectives and Istruments used by the Privileged National Bank of the Kingdom of Serbia (1884 - 1914) By Milan Sojic; Ljiljana Djurdjevic
  2. Banking and Central Banking in Pre-WWII Grecce: Money and Currency Developments By Sophia Lazaretou
  3. Banking in Turkey: History and Evolution By Yuksel Gormez
  4. Historical review of “umbrella supervision” by the Board of Governors of the Federal Reserve System By Mark B. Greenlee
  5. The National Bank of Romania and its Isuue of Banknotes between Necessity and Possibility, 1880 - 1914 By George Virgil Stoenescu; Elisabeta Blejan; Brindusa Costache; Adriana Iarovici Aloman
  6. Growing up to Financial Stability By Michael D. Bordo
  7. Government response to home mortgage distress: lessons from the great depression By David C. Wheelock
  8. Banking and Finance in South - Eastern Europe: The Albanian Case By Kliti Ceca; Kelmend Rexha; Elsida Orhan
  9. Central Bank Involvement in Banking Crises in Latin America By Luis Ignacio Jácome
  10. Politicians: Be Killed or Survive By Bruno S. Frey; Benno Torgler
  11. The "De Medici New Generation": The Italian Foundations' Collections and Philanthropy in the Third Millennium By BESANA, ANGELA
  12. Post-1500 Population Flows and the Long Run Determinants of Economic Growth and Inequality By Louis Putterman; David N. Weil
  13. Direct versus Indirect Colonial Rule in India: Long-term Consequences By Lakshmi Iyer
  14. The Rise of Retirement Among African Americans: Wealth and Social Security Effects By Dora L. Costa

  1. By: Milan Sojic (National Bank of Serbia); Ljiljana Djurdjevic (National Bank of Serbia)
    Abstract: In the first thirty years of its operations, key functions of the privileged National Bank of the Kingdom of Serbia (1884-1914) were those of a creditor of the economy, issuer of currency and banker to the government. The National Bank’s success in the performance of its functions was mainly determined by the state of government finances. Peace and stability are a prerequisite for economic development and when we look at Serbia’s history from 1884 to 1914, all we see is a chain of wars. In such circumstances, Serbia did make significant economic headway, and the National Bank did do its best to achieve the goal it was set up to perform – to promote trade and economic activity by providing credits.
    Keywords: National Bank of Serbia; Central banking; Central bank objectives; History of finance; Financial institutions; Monetary policy.
    JEL: E58 N13 N23
    Date: 2008–07
  2. By: Sophia Lazaretou (Bank of Greece)
    Abstract: This paper aims to trace the history of central banking in pre-WWII Greece. To this end, we first study the country’s financial structure and its process of financial development. Several indices of financial development have been assessed and their evolvement has been studied. The country’s financial development had passed through different stages. Financial depth had increased in the turn of the 19th century and expanded further in the 1920s. However, on the basis of behavioural indices, banks were shown to be poorly asset-liability managed. They were also suffered by capital adequacy and were highly leveraged. The analysis of the composition of money supply and its long run behaviour suggests that monetary base variations were the proximate determinants of money supply movements, whereas money multiplier had a minimum impact. Central banking in pre-WWII Greece is viewed with regard to the monetary policy strategy, the monetary policy implementation framework and state interventions. The balance sheet of the Bank of Greece reveals an excessive focus on the chosen monetary policy strategy of a currency peg. Domestic credit was controlled via liquidity-providing standing facilities, either discounts or advances. Moreover, Bank’s considerable involvement in government re-financing might indicate that state interventions were considerable.
    Keywords: Central banking; Financial intermediation; Money.
    JEL: E50 N23
    Date: 2008–07
  3. By: Yuksel Gormez (Central Bank of Turkey)
    Abstract: The early stages of banking and finance in Turkey were one of its brightest periods, even though it was the toughest because of lack of capital and unfavourable initial conditions. The finance and banking conception was quite rational and potential crises were eliminated through careful choices. In the following years, boom and bust conditions dominated financial services provision with a crisis in every decade under different economic policy frameworks. Since 2001, European convergence has been leading the way and one may argue that Turkish banking and finance is ready for the challenges of the 21st century, supported by fast-increasing foreign participation that has increased capital adequacy ratios.
    Keywords: Money; Banking and finance; Turkey.
    JEL: E4 G1
    Date: 2008–07
  4. By: Mark B. Greenlee
    Abstract: The article reviews legislative history and supervisory practices related to bank holding companies with a view toward understanding what Congress meant by referring to the Board of Governors of the Federal Reserve System as the “umbrella supervisor” in the Gramm-Leach-Bliley Act. The first part of the article looks at the historical development of bank holding company law and regulation, which laid the foundation for the current practice of umbrella supervision. The second part of the article provides answers to questions related to the Board’s current role as umbrella supervisor: What does “umbrella supervision” mean, and is it different from “consolidated supervision”? How does the GLB Act limit the Board's authority and practice and when did the Board obtain all of the legal authority to allow it to practice umbrella supervision?
    Keywords: Bank holding companies ; Bank supervision ; Gramm-Leach-Bliley Act ; Banking law
    Date: 2008
  5. By: George Virgil Stoenescu (National Bank of Romania); Elisabeta Blejan (National Bank of Romania); Brindusa Costache (National Bank of Romania); Adriana Iarovici Aloman (National Bank of Romania)
    Abstract: The paper looks at the National Bank of Romania’s issue of banknotes from 1880 through 1914, highlighting the developments in the notes’ cover, the channels whereby the central bank put its notes into circulation, as well as the behaviour of the issuing house during episodes of crisis. The narrative evidence reveals that the Bank had successfully managed its seignorage right and maintained a stable and trustworthy domestic currency that ensured the country’s economic development in line with the other European economies of the time.
    Keywords: Money circulation; Banknote issue; Cover stock; Mortgage notes; Gold standard
    JEL: N13 N23 E42 E52 G21
    Date: 2008–07
  6. By: Michael D. Bordo (Rutgers University and NBER)
    Abstract: This lecture briefly revisits the evidence on the incidence and severity of different varieties of crises within the context of globalization then (pre 1914) and now (1980 to the present), in my earlier work with Barry Eichengreen and in my recent work with Chris Meissner. I then discuss the determinants of emerging market crises from the perspective of the recent balance sheet approach to financial crises which build on the earlier literatures of banking crises, debt crises, and first and second generation currency crises. This approach puts at centre stage the importance of financial development. I then peel the onion back further and consider the “deep” institutional determinants of financial development and their relation to financial stability. I conclude with some lessons from history.
    Keywords: Financial crises; Financial development and stability; Institutions.
    JEL: E44 G15 N20
    Date: 2008–07
  7. By: David C. Wheelock
    Abstract: The Great Depression was the worst macroeconomic collapse in U.S. history. Sharp declines in household income and real estate values resulted in soaring mortgage delinquency rates. According to one estimate, as of January 1, 1934, fully one-half of U.S. home mortgages were delinquent and, on average, some 1000 home loans were foreclosed every business day. This paper documents the increase in residential mortgage distress during the Depression, and discusses actions taken by state governments and the federal government to reduce mortgage foreclosures and restore the functioning of the mortgage market. Many states imposed moratoria on both farm and nonfarm residential mortgage foreclosures. Although moratoria reduced farm foreclosure rates in the short run, they appear to have also reduced the supply of loans and made credit more expensive for subsequent borrowers. The federal government took a number of steps to relieve residential mortgage distress and to promote the recovery and growth of the national mortgage market. The Home Owners Loan Corporation (HOLC) was created in 1933 to purchase and refinance delinquent home loans as long-term, amortizing mortgages. Between 1933 and 1936, the HOLC acquired and refinanced one million delinquent loans totaling $3.1 billion. The HOLC refinanced loans on some 10 percent of all nonfarm, owner-occupied dwellings in the United States, and about 20 percent of those with an outstanding mortgage. The Great Depression experience suggests how foreclosures might be reduced during the present crisis.
    Keywords: Home Mortgage Disclosure Act ; Mortgage loans ; Depressions
    Date: 2008
  8. By: Kliti Ceca (Bank of Albania); Kelmend Rexha (Bank of Albania); Elsida Orhan (Bank of Albania)
    Abstract: This paper aims to present the main developments of banking and finance in Albania in a historical perspective. This historical overview might help to better understand not only the great difficulties and obstacles the country faced in the past but also the successes it achieved. It is widely known that the financial system, especially the banking sector, is considered as very important as it serves as a catalyst for the economic development of the country. And this is because financial depth determines economic growth. The paper also highlights the future challenges that the Albanian financial system will face within the context of the country’s European integration and the EU harmonization of the financial policies.
    Keywords: Historical perspectives; Financial system; Bank-dominated system; Panics; EU integration
    JEL: G21 G22 N24
    Date: 2008–07
  9. By: Luis Ignacio Jácome
    Abstract: This paper reviews the nature of central bank involvement in 26 episodes of financial disturbance and crises in Latin America from the mid-1990s onwards. It finds that, except in a handful of cases, large amounts of central bank money were used to cope with large and small crises alike. Pouring central bank money into the financial system generally derailed monetary policy, fueled further macroeconomic unrest, and contributed to simultaneous currency crises, thereby aggravating financial instability. In contrast, when central bank money issuance was restricted and bank resolution was timely executed, financial disturbances were handled with less economic cost. However, this strategy worked provided appropriate institutional arrangements were in place, which highlights the importance of building a suitable framework for preventing and managing banking crises.
    Keywords: Working Paper , South America , Latin America , Central America , Central banks , Financial crisis , Banking crisis ,
    Date: 2008–05–29
  10. By: Bruno S. Frey; Benno Torgler
    Abstract: In the course of history, a large number of politicians have been assassinated. Rational choice hypotheses are developed and tested using panel data covering more than 100 countries over a period of 20 years. Several strategies, in addition to security measures, are shown to significantly reduce the probability of politicians being attacked or killed: extended institutional and governance quality, democracy, voice and accountability, a well functioning system of law and order, decentralization via the division of power and federalism, larger cabinet size and strengthened civil society. There is also support for a contagion effect.
    Keywords: Assassinations, rational choice, governance, democracy, dictatorship, deterrence, protection.
    JEL: D01 D70 K14 K42 Z10
    Date: 2008–10
    Abstract: Lorenzo de Medici, his family and his followers were well-known bankers, merchants and investors. The cultural heritage of Tuscany and Italy profited by a very great influence of this Highlighted Sponsor. Tuscany is nowadays a comprehensive heritage, one of the treasure the Italian Cultural Market has inherited. Since de Medici’s century, the bank industry has experienced a strong involvement in the support of the Italian culture. The bank industry is nowadays split in “for profit” and “not for profit” branches. The not for profit is connected with bank foundations, lately born in Italy (1990). Bank foundations are fund-givers of big philanthropy next to Public Administrations and foundations of big-sized Italian Firms of the famous “Made in Italy. Next to banks and bank foundations’ there is also corporate philanthropy of several Italian Firms. The assets and philanthropy of Italian Corporate Foundations have not been fully investigated yet. Corporate Foundations do develop exhibiting goals too, collecting and showing works of art of traditional and recent categories (from paintings to applied arts; from sculptures to design). In the economical literature Bank foundations have been mostly investigated recently. Nevertheless, bank and corporate foundations are not only grant-makers. Having collected arts and heritages through their bank and investing policies and services, they are now realizing their exhibiting potentials. Bank Foundation Museums, Industrial Museums and Corporate collections are now estimated as an opportunity to strengthen the relationship between foundations and their cultural stakeholders. Art collections are part of the communication mix and branding of the propensity to arts and heritage commitment. This paper contains, first of all, an analysis of criteria of Italian Foundations Philanthropy, particularly of Bank Foundations. It will be, secondly, discussed of strategies and polarities of grant-making and operating in the arts. Collections and Museums will be studied in their implementation process, both offline and online. Cataloguing will be demonstrated as refers to international standards. Networking strategies with national and international institutions will be examined, in order to justify the touring of collections. It will be finally verified the wideness and correlation of grant-making and operating of these foundations in the economics of culture.
    Keywords: philanthropy; collection; foundation; bank; corporate
    JEL: D21 L30 D64 D52 G20
    Date: 2008–10–30
  12. By: Louis Putterman; David N. Weil
    Abstract: We construct a matrix showing the share of the year 2000 population in every country that is descended from people in different source countries in the year 1500. Using this matrix, we analyze how post-1500 migration has influenced the level of GDP per capita and within-country income inequality in the world today. Indicators of early development such as early state history and the timing of transition to agriculture have much better predictive power for current GDP when one looks at the ancestors of the people who currently live in a country than when one considers the history on that country's territory, without adjusting for migration. Measures of the ethnic or linguistic heterogeneity of a country's current population do not predict income inequality as well as measures of the ethnic or linguistic heterogeneity of the current population's ancestors. An even better predictor of current inequality in a country is the variance of early development history of the country's inhabitants, with ethnic groups originating in regions having longer histories of agriculture and organized states tending to be at the upper end of a country's income distribution. However, high within-country variance of early development also predicts higher income per capita, holding constant the average level of early development.
    JEL: F22 N30 O40
    Date: 2008–10
  13. By: Lakshmi Iyer (Harvard Business School, Business, Government and the International Economy Unit)
    Abstract: This paper compares economic outcomes across areas in India which were under direct British colonial rule with areas which were under indirect colonial rule. Controlling for selective annexation using a specific policy rule, I find that areas which experienced direct rule have significantly lower levels of access to schools, health centers and roads in the post-colonial period. I find evidence that the quality of governance in the colonial period has a significant persistent effect on post-colonial outcomes.
    Keywords: colonial rule, development, public goods
    JEL: O11 P16 N45
    Date: 2005–01
  14. By: Dora L. Costa
    Abstract: I examine the effects of an unearned income transfer on the retirement rates and living arrangements of a very poor population by studying the effects of pensions on the decisions of black Union Army veterans. I find that blacks were 2 to 5 times as responsive as whites to income transfers in their retirement decisions and 6 to 8 times as responsive in their choice of independent living arrangements. I argue that blacks' greater poverty explains their responsiveness to pensions. My findings have implications for understanding racial differences in trends in retirement and independent living. I show that the retirement rates of both blacks and whites rose between 1900 and 1930 but that convergence in black and white rates and in living arrangements only occurred between 1930 and 1950. I argue that income effects from the institution of Social Security explain up to half of the convergence in black-white retirement rates and in living arrangements.
    JEL: J14 J26 N31
    Date: 2008–11

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