Amsterdam and London as financial centers in the eighteenth century

Abstract

In the seventeenth century, Amsterdam and London developed distinctive innovations in finance through both banks and markets that facilitated the growth of trade in each city. In the eighteenth century, a symbiotic relation developed that led to bank-oriented finance in Amsterdam cooperating with market-oriented finance in London. The relationship that emerged allowed each to rise to unprecedented dominance in Europe, while the respective financial innovations in each city provided the means for the continued expansion of European trade, both within Europe and with the rest of the world. The increasing strains of war finance for the competing European powers over the course of the eighteenth century stimulated fresh financial innovations in each city that initially reinforced the symbiosis of the two centers. The external shocks arising from revolutionary movements in America and France, however, interrupted the relationship long enough to leave London as the supreme financial center.

The correlates of international financial‐center status

“…Neal () points to the development of a liquid market in government debt following the Glorious Revolution of 1688 . Carlos and Neal () highlight the establishment of the Bank of England in 1694, explaining how this made London an attractive venue for not just domestic but also foreign investors, notably the Dutch . These and other authors point to Britain's position as the first industrial nation and to its 19th century naval power, which translated into a large volume of overseas trade and made London a logical source of trade credit for domestic and foreign merchants…”

Poder Monetário Estrutural: do padrão ouro ao dólar flexível

“…Ao longo desse período, as duas cidades possuíam centros financeiros com características distintas Neal, 2011). Londres era dominante na negociação de letras de câmbio por agentes privados enquanto Amsterdã se destacava pelo sistema de pagamentos, baseado em um banco público.…”

The Bank of Amsterdam Through the Lens of Monetary Competition

“…The bill market in Hamburg shut 25 down for months, and Prussia suspended commercial debts. The result was that the markets that feed demand to Amsterdam shrank and began relying more on London (Carlos and Neal 2011).…”