Real Effects of Supplying Safe Private Money
Journal of Financial Economics, 2024

Xu, Chenzi; Yang, He
Privately issued money often bears default risk, which creates transaction frictions when used as a medium of exchange. The late 19th century US provides a unique context to evaluate the real effects of supplying a new type of money that is safe from default. We measure the local change in "monetary" transaction frictions with a market access approach derived from general equilibrium trade theory. Consistent with theories hypothesizing that lowering transaction frictions benefits the traded and inputs-intensive sectors, we find an increase in traded goods production, in the share of manufacturing output and employment, and in innovation.

Independent Regulators and Financial Stability Evidence from Gubernatorial Election Campaigns in the Progressive Era
Journal of Financial Economics, 2024

Del Angel, Marco; Richardson, Gary
Regulatory independence forms a foundation for modern financial systems. The institutions' value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors' supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics' impact on banks and the economy.

Measuring Inflation Expectations in Interwar Britain
Economic History Review, 2023

Lennard, Jason; Meinecke, Finn; Solomou, Solomos
What caused the recovery from the British Great Depression? A leading explanation--the 'expectations channel'--suggests that a shift in expected inflation lowered real interest rates and stimulated consumption and investment. However, few studies have measured, or tested the economic consequences of, inflation expectations. In this paper, we collect high-frequency information from primary and secondary sources to measure expected inflation in the United Kingdom between the wars. A high-frequency vector autoregression suggests that inflation expectations were an important source of the early stages of economic recovery in interwar Britain.

The Legal Origins of Financial Development: Evidence from the Shanghai Concessions
Journal of Finance, 2023

Levine, Ross; Lin, Chen; Ma, Chicheng; Xu, Yuchen
The primary challenge to assessing the legal origins view of comparative financial development is identifying exogenous changes in legal systems. We assemble new data on Shanghai's British and French concessions between 1845 and 1936. Two regime changes altered British and French legal jurisdiction over their respective concessions. By examining the changing application of different legal traditions to adjacent neighborhoods within the same city and controlling for military, economic, and political characteristics, we offer new evidence consistent with the legal origins view: the financial development advantage in the British concession widened after Western legal jurisdiction intensified and narrowed after it abated.

Sticky Wages and the Great Depression: Evidence from the United Kingdom
European Review of Economic History, 2023

Lennard, Jason
How sticky were wages during the Great Depression? Although classic accounts emphasise the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages changed infrequently but that wage cuts were more common than wage rises on average. Nominal wage adjustment fluctuated over time and by state, so that in 1931 amid falling output and prices more than one-third of workers received wage cuts.