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Title:Is the law of reflux valid? PDF Logo
Authors:Hortlund, Per
Issue Date:2005
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 599
Abstract:In the classical monetary debates, the Banking School held that notes would be equally demand-elastic whether supplied by many or a single issuer. The Free Banking School held that notes would be less demand-elastic if supplied by a single issuer. These assertions have rarely, if ever, been subject to more stringent statistical testing. In this paper I compare the elastic properties of the note stock of the Swedish note banking system in 1880-1895 with those of the regime in 1904-1913, when the Bank of Sweden held a note monopoly. Evidence suggests that notes did not become less elastic after monopolisation, thus lending support to the views of the Banking School.
Subjects:Banking School
Free Banking School
Elastic currency
Clearing mechanism
Needs of trade
Law of Reflux
Real bills doctrine
JEL:B12
E42
E51
E58
N13
N23
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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