Journal Article

Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks

Manfred Neldner

in European Review of Economic History

Volume 2, issue 3, pages 289-308
Published in print December 1998 | ISSN: 1361-4916
Published online December 1998 | e-ISSN: 1474-0044 | DOI: http://dx.doi.org/10.1017/S1361491698000136
Lessons from the free banking era in Switzerland: The law of adverse clearings and the role of the non-issuing credit banks

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Free banking in Switzerland lasted from 1826 to 1907. Although the system was reasonably successful, the Swiss experience has been almost entirely neglected in the debate over free banking. In its more advanced state of development, the stability of the Swiss free banking system deteriorated, since (1) all assumptions underlying the so-called law of adverse clearings were more or less violated, and (2) the note-issuing banks were prevented by their non-issuing rivals from increasing their discount rates, even if some of them were faced with heavy losses of specie. In 1907, therefore, free banking had to be abandoned.

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Subjects: Industrial History ; Labour History ; Economic History

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