Financing Long-Distance Trade: The Joint Liability Rule and Bills of Exchange in Eighteenth-Century France

Santarosa, Veronica

doi:10.1017/s0022050715001072

Cited by 44 publications

(18 citation statements)

References 28 publications

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“…discounting -of a bill, the previous owner endorsed the bill thereby guaranteeing the following purchaser of the bill to pay in case of a default of the ultimate debtor. If a bill was discounted several times, each endorser became jointly liable together with the other endorsers of the end-payment of the bill (Santarosa, 2015).…”

Section: The Financial System and The Smoothing Of Crises In 19th Cenmentioning

confidence: 99%

Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th Century France

Bignon

Jobst

2017

SSRN Journal

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This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-indifferences panel regressions and emulate crises by studying how defaults of banks and non-agricultural firms were affected by the arrival of an agricultural disease. We exploit the specificities of the implementation of the discount window to deal with the endogeneity of the access to the central bank to the arrival of the crisis and local default rates. We find that broad eligibility reduced significantly the increase in the default rate when the shock hit the local economy. A counterfactual exercise shows that defaults would have been 10% to 15% higher if the Bank of France would have implemented the strictest eligibility rule. This effect is identified independently of changes in policy interest rates and the fiscal deficit.

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Section: The Financial System and The Smoothing Of Crises In 19th Cenmentioning

confidence: 99%

Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th Century France

Bignon

Jobst

2017

SSRN Journal

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“…Its geostrategic location put the city in an ideal position sixteenth century. Commerce and commerce-related industries turned the 4 In this sense it offers an interesting contrast with the article by Santarosa (2015) on bills of exchange in eighteenth-century France which could only function as a result of legal changes in the absence of intermediary (institutions). 5 Throughout the article the terms underwriters and insurance sellers, on the one hand, and insurance buyers/purchasers/takers, insured, and policyholders, on the other hand, are used as synonyms.…”

Section: Biography Of An Antwerp Insurance Brokermentioning

confidence: 99%

Marketing and Pricing Risk in Marine Insurance in Sixteenth-Century Antwerp

Puttevils¹,

Deloof²

2017

J. Econ. Hist.

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Drawing on a set of insurance contracts brokered in Antwerp in 1562-1563, we demonstrate that by that time Antwerp hosted a sophisticated, large, and international market for marine insurance in which small and large traders could acquire and sell insurance, backed by the intermediation of a large broker, Juan Henriquez who functioned as an open-access institution. Using information determine the effect of different contract parameters.

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“…The joint liability attached to endorsement played a major role in ameliorating fundamental information problems in long-distance trade and finance, so facilitated the expansion of the foreign exchange market beyond personal networks. Santarosa (2015) has empirically examined the role of the joint liability rule in reducing asymmetric information in long-distance trade. First, negotiable bills of exchange contained a threat of adverse selection caused by the incentive of sellers to pass on the bills of riskier debtors.…”

Section: Bills Of Exchange: Endorsement and The Joint Liability Rulementioning

confidence: 99%

Money Markets and Exchange Rates in Preindustrial Europe

Noguès-Marco

2020

Handbook of the History of Money and Currency

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This chapter focuses on money markets and exchange rates in preindustrial Europe. The foreign exchange market was mostly based on bills of exchange, the instrument used to transfer money, and provide credit between distant centers in preindustrial Europe. In this chapter, first I explain bill of exchange operations, money market integration, usury regulations and circumventions to hide the market interest rate, as well as the evolution of bills of exchange in history, focusing mainly on the most relevant features generalized during the first half of the seventeenth century: endorsement and the joint liability rule, which facilitated the full expansion of the foreign exchange market beyond personal networks. Then, I describe the European geography of money in the mid-eighteenth century, characterized by a very high degree of multilateralism with the triangle of Amsterdam, London, and Paris as the backbone of the European settlement system. Finally, I measure the cost of capital and relate it to liquidity. I show evidence of interest rates in the eighteenth century for Amsterdam, London, Paris, and Cadiz. While Amsterdam, London, and Paris presented low and similar

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Financing Long-Distance Trade: The Joint Liability Rule and Bills of Exchange in Eighteenth-Century France

Cited by 44 publications

References 28 publications

Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th Century France

Economic Crises and the Eligibility for the Lender of Last Resort: Evidence from 19th Century France

Marketing and Pricing Risk in Marine Insurance in Sixteenth-Century Antwerp

Money Markets and Exchange Rates in Preindustrial Europe

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