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Working Paper No. 62. The Provision of Liquidity in the Swedish Note Banking System 1878–1901

PublicationWorking paper
Clearing mechanism, Ekonomisk historia, Företagandets villkor, Lagrestriktioner, Per Hortlund
Working Paper No. 62.
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Abstract

The working of the ”asset currency” provided by the Swedish note banking system in 1878–1901 is described. Natural and institutional conditions caused the demand for currency to peak in March and September, with troughs in July and January. The paper investigates how the Enskilda banks provided liquidity to solve the problem. This is done by describing how the volume of notes varied over the year, and how other balance sheet items co-moved with them. Strong seasonal co-variation is found particularly between lend-ing and foreign payments media, varying like communicating vessels over the sailing season in May–October (when the sea was ice free and shipments were made).

Hortlund, P. (2005). The Provision of Liquidity in the Swedish Note Banking System 1878–1901. Ratio Working Paper No. 62.

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Working Paper No. 69. Does Inflation and High Taxes Increase Bank Leverage?
Working paperPublication
Hortlund, P.
Publication year

2005

Published in

Ratio Working Paper

Abstract

Does the combination of inflation and high corporate taxes explain the increase in bank leverage in the 20th century? Inflation automatically increases bank debt, while high corporate taxes hinder capital accumulation. Capital ratios therefore drop, until leverage-induced returns are sufficient to uphold them at constant levels. This theory was confronted with Swedish bank data 1870–2001. Bank capital ratios dropped when inflation and corporate tax rates were high, during WWI and in 1940–1980. The theory can explain the sinking bank capital ratios during these periods, but also their relative stability since the early 1980s. High corporate taxes and inflation were estimated to account for half of the drop in Swedish bank capital ratios since WWII.

Working Paper No. 69. Does Inflation and High Taxes Increase Bank Leverage?
Working paperPublication
Hortlund, P.
Publication year

2005

Published in

Ratio Working Paper

Abstract

Does the combination of inflation and high corporate taxes explain the increase in bank leverage in the 20th century? Inflation automatically increases bank debt, while high corporate taxes hinder capital accumulation. Capital ratios therefore drop, until leverage-induced returns are sufficient to uphold them at constant levels. This theory was confronted with Swedish bank data 1870–2001. Bank capital ratios dropped when inflation and corporate tax rates were high, during WWI and in 1940–1980. The theory can explain the sinking bank capital ratios during these periods, but also their relative stability since the early 1980s. High corporate taxes and inflation were estimated to account for half of the drop in Swedish bank capital ratios since WWII.

Working Paper No. 67. Clearing vs. Leakage: Does Note Monopoly Increase Money and Credit Cycles?
Working paperPublication
Hortlund, P.
Publication year

2005

Published in

Ratio Working Paper

Abstract

The effects of note monopolisation on the amplitude of money and credit cycles are studied. Note monopolisation trades clearing for leakage. If the central bank’s reserve ratio is larger than that of the commercial banks, and if the currency-deposit ratio is sufficiently large, the leakage effect could domi-nate the loss-of-clearing effect (base expansion), such that the credit capacity of the banking system decreases. This was the case when the Bank of Sweden gained a note monopoly in 1904. Money and credit cycles should therefore have become smaller. Swedish bank data for 1871–1938 reveal that money cycles became smaller, but credit cycles larger. The latter is attributed to an increasing time-demand deposit ratio, which increases the credit capacity of the banking system.

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