Credit constraints and distance, what room for Central banking? The French experience (1880-1913)

Although a relative consensus is emerging about the economic effects of credit development, many controversies remain as to the role of the central bank in that development. This paper addresses the process of credit allocation by the central bank as observed on a spatial basis. It examines how and why improved geographical access to the central bank contributes to credit development by looking at the Fench experience in the ‘classical period' (1880-1913). In an environment of emerging, but highly prudent, deposit banks and the absence of a centralised money market, Banque de Fance branches had enough supply and demand to generate a network. Access to “central loans” hence reduced liquidity constraints and encouraged local banks and firms to lend. We shape the proof in two stages. First, a simple banking model presents our intuition and the mechanisms at work. Second, we take a new data set on the development of credit by French geographic area (département) to test our hypothesis using panel econometric tools. The results show the Banque de France branches having a strong and robust impact on credit development.credit constraint ; distance ; soft information ; succursales of the Banque de France ; credit development

Looking on English and German banking in the French mirror: Banking and development in France (1880-1913)

This paper aim to prove positive correlations between local banking, industry, innovation, and growth in the French classical period (1880-1913). Empirical works on GDP per capita growth gives positive correlation with local banking indicator. The relation is all the more strong since local banking tied on non agricultural economies. Thus, we open the black box and give evidence of local banking connection with innovation. We set the proof through panel data analysis on a spacial basis. Regard to so called German and English banks performances, local knowledge looks like a key point of industrialization, at least in the French experience.local banking ; information management ; industrial development ; innovation

Credit constraints and distance, what room for Central banking? The French experience (1880-1913)

Although a relative consensus is emerging about the economic effects of credit development, many controversies remain as to the role of the central bank in that development. This paper addresses the process of credit allocation by the central bank as observed on a spatial basis. It examines how and why improved geographical access to the central bank contributes to credit development by looking at the Fench experience in the ‘classical period' (1880-1913). In an environment of emerging, but highly prudent, deposit banks and the absence of a centralised money market, Banque de Fance branches had enough supply and demand to generate a network. Access to “central loans” hence reduced liquidity constraints and encouraged local banks and firms to lend. We shape the proof in two stages. First, a simple banking model presents our intuition and the mechanisms at work. Second, we take a new data set on the development of credit by French geographic area (département) to test our hypothesis using panel econometric tools. The results show the Banque de France branches having a strong and robust impact on credit development.Ce papier examine les effets du réseau de succursale de la Banque de France sur le développement du crédit de 1880 à 1914. Bien que controversée ailleurs, cette politique semble avoir été bénéfique dans le cas français. Nous montrons ainsi que certaines préconditions (le manque de centralisation du marché monétaire ou les effets structurels liés à la concurrence des banques de dépôts) ont permis de joindre offre et demande de succursales amenant l'action locale de la Banque de France. Un modèle bancaire simple permet de saisir les intuitions de ce phénomène. La construction d'une nouvelle base de données sur le développement du crédit par département français nous permet ensuite d'apporter une preuve empirique quantifiable. L'étude économétrique en panel montre finalement qu'une succursale explique en moyenne 25% du développement du crédit d'un département à cette époque

Looking on English and German banking in the French mirror: Banking and development in France (1880-1913)

This paper aim to prove positive correlations between local banking, industry, innovation, and growth in the French classical period (1880-1913). Empirical works on GDP per capita growth gives positive correlation with local banking indicator. The relation is all the more strong since local banking tied on non agricultural economies. Thus, we open the black box and give evidence of local banking connection with innovation. We set the proof through panel data analysis on a spacial basis. Regard to so called German and English banks performances, local knowledge looks like a key point of industrialization, at least in the French experience.Cet article établit d'intéressantes corrélations entre activité des banques locales, industrie, innovation et développement industriel en France de 1880 à 1914. En effet, les résultats empiriques montrent que les taux de croissance du PIB et du produit non agricole sont d'autant plus forts que l'activité des banques locales est grande dans un département donné. Nous entrons alors dans cette "boîte noire" et établissons un fort lien entre activité des banques locales et innovation (appréhendée par une taxe sur les brevets d'invention). Ainsi, la gestion locale de l'information semble jouer un rôle majeur par sélection directe ou indirecte des meilleurs projets. Au regard des activités bancaires d'outre-Manche et d'outre-Rhin de l'époque, ces résultats pourraient offrir une avancée, même modeste, au vieux débat "gerschenkronien"

Bertrand Blancheton & Hubert Bonin, La croissance en économie ouverte (xviiie -xxe siècles), Bruxelles, P.I.E. Peter Lang, 2009, 468 p.

Rendant hommage à la carrière et aux travaux de Jean Charles Asselin, cet ouvrage collectif entend étudier la croissance en économie ouverte du xviiie au xxe siècle. Se conjuguent ici quelques cas types, tant micro que macro, offrant une perspective historique, politique et institutionnelle aux théories économiques relevant du lien entre ouverture et croissance. Bien que le sujet soit large et les contributions nombreuses, la conjonction des travaux permet l’analyse des multiples modèles d’ou..

Measuring and Explaining the Evolution of Financial Efficiency

Finance has played an increasing important role in European economies, growingfrom 2.3 per cent of GDP in 1951 to 8.2 per cent in 2007. But since the subprimemortgage crisis, the role and size of finance in our societies has been hotly debated.A key question in the debate is whether recent financial developments justify theaccrued importance of finance in our economies and whether, as some propose, reg-ulation should be aimed at reducing its importance. This report proposes a measureof the unit cost of the production of financial services over the long term in someEuropean countries, as a way of assessing the efficiency gains in financial servicesproduction. The results show that finance in Europe has become more “expensive"since the 1970s, just when deregulation was intended to make it more productive.The growth in intermediation costs between 1970 and 1990 can nevertheless beexplained by macroeconomic and monetary conditions. By contrast, the increase inunit cost after 1990 in some countries coincided with the development of modernfinance that gives a greater role to market activit

Has finance become too expensive? An estimation of the unit cost of financial intermediation in Europe, 1951-2007

International audienceFinance played an increasing important role in European economies, growing from 2.3 per cent of GDP in 1951 to 8.2 per cent in 2007. But since the subprime mortgage crisis, the role and size of finance in our societies has been hotly debated. A key question in the debate is whether recent financial developments justify the accrued importance of finance in our economies and whether, as some propose, regulation should be aimed at reducing its importance. This study proposes a measure of the unit cost of the production of financial services over the long term in Europe, as a way of assessing the efficiency gains in financial services production. The results show that finance has become more “expensive” since the 1970s, just when deregulation was intended to make it more productive. The growth in intermediation costs between 1970 and 1990 can nevertheless be explained by macroeconomic and monetary conditions. By contrast, the increase in unit cost after 1990 coincides with the development of modern finance that gives a greater role to market activity

Financial Consumption and the Cost of Finance: Measuring Financial Efficiency in Europe (1950-2007)

This paper proposes to assess financial intermediation efficiency in Germany, France, the UK, and Europe more broadly, over the past 60 years. I rely on Philippon's (2012) methodology, which calculates the unit cost of financial intermediation through the ratio of 'financial consumption' | measured by financial income | to 'financial output' | approximated by the sum of outstanding assets intermediated. The contribution of this paper is threefold. First, because financial industry VA ignores banks' capital income (capital gains, dividends and interest on securities) it is an imperfect measure of the consumption of financial intermediation. So long as capital income generates wages and profits to financial intermediaries, it is akin to an implicit consumption of financial services. Using banking income instead of banking VA to measure the consumption of banking services, I show that the GDP share of finance has increased continuously in Germany, France, the UK and Europe as a whole. Second, the unit cost of financial intermediation increased over the past 40 years, except in France where, overall, it stagnated. In addition, the European unit cost matches the US unit cost calculated by Philippon (2012). Finally, because financial intermediaries deal with nominal stocks and ows, and because the unit cost increases during periods of monetary troubles, I focus here on nominal rates of interest to explain the evolution of unit cost. I show that a rise in nominal rates of interest increases the spread of bank interest, so that 1970s and 1980s high unit costs are statistically explained by increases in short-term interest rates. On the other hand, post-1990s high unit cost seems to coincide with the development of new market-based activities

La finance est-elle devenue trop chère ? Estimation du coût unitaire d'intermédiation financière en Europe 1951-2007

International audienceLa finance a pris une place de plus en plus conséquente dans les économies européennes, passant de 2,3 % à 8,2 % du PIB entre 1951 et 2007. Aujourd’hui, après la crise des subprimes, la place de la finance dans nos sociétés est profondément débattue. Un élément clé du débat est de savoir si les développements récents de ce secteur justifient son poids accru dans nos économies ou si, comme certains le suggèrent, une réglementation adaptée devrait viser à réduire le poids de la finance. Cette étude propose une mesure du coût unitaire de production de services financiers sur longue période en Europe, de manière à évaluer l’évolution de l’efficacité de la production de ces services financiers. Les résultats montrent que la finance est devenue plus « coûteuse » à partir des années 1970, au moment même où la déréglementation visait à la rendre plus performante. L’augmentation des coûts d’intermédiations durant les années 1970 et 1980 peut néanmoins s’expliquer par les conditions macroéconomiques et monétaires. Le coût unitaire élevé après 1990 coïncide avec le développement de la finance moderne donnant une plus grande place aux activités de marché