Abstract
This article studies the financial market integration in the 1670s by examining the effectiveness of triangular exchange arbitrage. The results suggest that international credit markets based on bills of exchange in northwestern Europe were well integrated and responded to exchange-rate differences quickly. The speed of adjustment, ranging between one and three weeks, accorded with the speed of communication, but the transaction cost associated with exchange arbitrage was much lower than that of shipping bullion. Although warfare had a disruptive effect on exchange arbitrage by increasing transaction cost, markets were resilient in remaining efficient.
Publisher
Cambridge University Press (CUP)
Reference31 articles.
1. Beneath the Gold Points: European Financial Market Integration, 1844-1870
2. Nogues-Marco P. , Herranz-Loncán A. and Aslandinis N. (2017). The making of a national currency: spatial transaction costs and money market integration in Spain (1825–1874). Working Paper, CEPR DP12453.
Cited by
2 articles.
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