Periodic Reporting for period 1 - EUROCBH (Europe and Its Central Banks: Lessons from History)
Berichtszeitraum: 2021-03-01 bis 2023-02-28
EUROCBH enabled a better understanding of the role of central banks in promoting the long way to a national credit market in Italy and France between the end of the 19th century and the first half of the 20th century. It opened also new perspectives on our understanding of central banks' operations during industrial crisis.
Particularly, the activity of EUROCBH has been organized around two main pillars:
1) Discount activities of the Banque de France and Banca d'Italia from the second half of the 19th century to the 1930s;
2) The industrial intervention of the Banca d'Italia from its establishment in 1894 until 1936.
In the first pillar, the project focused on the study of bills of exchange discounted in each branch of the French and Italian central bank (BdF) from 1851 to 1936. The key role of the two central banks in both countries makes them a unique observatory of the bills of exchange’s circulation over time. In the second pillar, the project focused on the role of the Banca in the launch and management of the ‘Consorzio Sovvenzioni sui Valori Industriali’ (hereinafter Consorzio) in 1914 and the Special Section of the Consorzio in the early 1920s. These were companies holding stakes in numerous firms and industrial sectors, with which the Banca, often on behalf of the government, came to be a major industrial actor.
Particularly, the activity of EUROCBH has been organized around two main pillars:
1) Discount activities of the Banque de France and Banca d'Italia from the second half of the 19th century to the 1930s;
2) The industrial intervention of the Banca d'Italia from its establishment in 1894 until 1936.
In the first pillar, the project focused on the study of bills of exchange discounted in each branch of the French and Italian central bank (BdF) from 1851 to 1936. The key role of the two central banks in both countries makes them a unique observatory of the bills of exchange’s circulation over time. In the second pillar, the project focused on the role of the Banca in the launch and management of the ‘Consorzio Sovvenzioni sui Valori Industriali’ (hereinafter Consorzio) in 1914 and the Special Section of the Consorzio in the early 1920s. These were companies holding stakes in numerous firms and industrial sectors, with which the Banca, often on behalf of the government, came to be a major industrial actor.
EUROCBH collected new fine-grained data for the discount activities of the Banque de France and Banca d'Italia from 1851 to 1936.
Concerning France, at Paris School of Economics we created a new dataset on the volume of commercial bills (re)discounted by the Banque de France in about two hundred cities from 1851 to 1871. This enables us to provide the first, comprehensive geographical overview of the discount activities of the French central bank, mirroring the growing economic and financial openness of French cities over time.We observed a significant heterogeneity in the level of openness of the single cities, which we tried to explain with a panel analysis considering other geo-referenced factors such as population per province and the presence of private banks. We also discussed to what extent the historical evolution of integration is consistent with other narratives of local development.
Concerning Italy, the project is being jointly carried out by the Paris School of Economics, Banca d’Italia, and the Department of Economic and Social History of the University of Vienna and PSE.
The work performed consists in the realization of the first dataset collecting the most relevant data on the provincial credit activities of the Italian banks of issue from national unification to the complete transformation of the Banca d’Italia into the country’s central bank. The dataset is extremely detailed in its geographical coverage and allow to and answer new research questions concerning the features of competition and complementarity between issuing banks operating on the same local market, the economic and financial integration across the Italian provinces, and the role of the banks of issue in the evolution of regional economic divides and in the emergence of a nationwide hierarchy of financial centers.
Differently from WP1, we took in WP2 a business history approach, using case-studies to illustrate broader trends pertaining to the evolution of central banking and the role of the Banca d’Italia in the country’s industrial and economic development.
Communication of the results to a non-academic audience was carried out thanks to the podcast “Histories the research” produced by the FMSH (Fondation Maison des Sciences de l’Homme) and published on Canal-U, the audiovisual platform for higher education and research in France.
Dissemination of the project results was carried regularly through conferences and workshop, and particularly through the workshop “Where is the money? Financial networks and the geography of credit development”, jointly organised by PSE and the Department of Economic and Social History of the University of Vienna. Vienna, Oesterreichische Nationalbank, Vienna, 6-7 October 2022.
Concerning France, at Paris School of Economics we created a new dataset on the volume of commercial bills (re)discounted by the Banque de France in about two hundred cities from 1851 to 1871. This enables us to provide the first, comprehensive geographical overview of the discount activities of the French central bank, mirroring the growing economic and financial openness of French cities over time.We observed a significant heterogeneity in the level of openness of the single cities, which we tried to explain with a panel analysis considering other geo-referenced factors such as population per province and the presence of private banks. We also discussed to what extent the historical evolution of integration is consistent with other narratives of local development.
Concerning Italy, the project is being jointly carried out by the Paris School of Economics, Banca d’Italia, and the Department of Economic and Social History of the University of Vienna and PSE.
The work performed consists in the realization of the first dataset collecting the most relevant data on the provincial credit activities of the Italian banks of issue from national unification to the complete transformation of the Banca d’Italia into the country’s central bank. The dataset is extremely detailed in its geographical coverage and allow to and answer new research questions concerning the features of competition and complementarity between issuing banks operating on the same local market, the economic and financial integration across the Italian provinces, and the role of the banks of issue in the evolution of regional economic divides and in the emergence of a nationwide hierarchy of financial centers.
Differently from WP1, we took in WP2 a business history approach, using case-studies to illustrate broader trends pertaining to the evolution of central banking and the role of the Banca d’Italia in the country’s industrial and economic development.
Communication of the results to a non-academic audience was carried out thanks to the podcast “Histories the research” produced by the FMSH (Fondation Maison des Sciences de l’Homme) and published on Canal-U, the audiovisual platform for higher education and research in France.
Dissemination of the project results was carried regularly through conferences and workshop, and particularly through the workshop “Where is the money? Financial networks and the geography of credit development”, jointly organised by PSE and the Department of Economic and Social History of the University of Vienna. Vienna, Oesterreichische Nationalbank, Vienna, 6-7 October 2022.
Concerning France, we made several contributions to the literature on how and when credit markets became national. First, we explore the case of modern France, a country for which, in comparison to neighboring nations such as Germany and Italy, we still lack of substantial quantitative studies on regional market openness in historical perspective. Second, we look at financial integration from the point of view of so far neglected actors, namely central banks, which until now have been overwhelmingly studied in their institutional development and for the evolution of their monetary policies (both in a national and international context) rather than as local makers of private credit markets . The results of the project can therefore also be read as a novel contribution to the role played by the Banque de France as an agent of integration on local credit markets. Our first finding is that – among the bills discounted by the central bank – the share of national bills increased sharply during the 1920s, after a long quasi-stagnation throughout the 19th century. The banking crises of the Great Depression stopped the rise but did not trigger a return to pre-war level. Second, the increase of "national" financial transactions in the 1920s is associated with the largest increase in commercial bank branches in French history. Our argument is that after World War I, the French credit markets suddenly become very different from what it had been before. Among other things, this implies that the chronology of the development of a national credit market was different from the chronology of international financial integration (the end of the first globalization being often dated to the break of WWI). The decade that stands between the end of WWI and the Great Depression experienced one of the most radical and rapid shifts in financial history.
Concerning Italy, the dataset - collecting the most relevant data on the provincial credit activities of the Italian banks of issue - will be made public , in line with Horizon 2020 policy on the dissemination of historical statistics as common goods and according to the FAIR (findable, accessible, interoperable, and re-usable) principles of data management. Moreover, the dataset naturally lends itself to processing through Historical Geographical Information Systems (HGIS). In the medium term, we are planning to establish a dedicated website that will present the data and include a story map that illustrates our main findings on the credit policy of the Italian banks of issue by combining text, interactive maps and other multimedia content.
With regard to the industrial policy of the bank of Italy, our research finds that ‘managing instability’ was the main goal of the central bank in the period 1893-1926. A ‘pragmatic approach’ in central banking appeared to be the norm in that period. While the provision of industrial finance proved the norm more than the exception, that approach did not match at all the best practice of central banking, i.e. the principles of independence and price stability, as it has long been postulated in the dominant macroeconomic theory until the financial crisis in 2007-8 and, more recently, the Covid-19 pandemic.
Overall, the main potential users of the project results will be the international community of economic historians.
Concerning Italy, the dataset - collecting the most relevant data on the provincial credit activities of the Italian banks of issue - will be made public , in line with Horizon 2020 policy on the dissemination of historical statistics as common goods and according to the FAIR (findable, accessible, interoperable, and re-usable) principles of data management. Moreover, the dataset naturally lends itself to processing through Historical Geographical Information Systems (HGIS). In the medium term, we are planning to establish a dedicated website that will present the data and include a story map that illustrates our main findings on the credit policy of the Italian banks of issue by combining text, interactive maps and other multimedia content.
With regard to the industrial policy of the bank of Italy, our research finds that ‘managing instability’ was the main goal of the central bank in the period 1893-1926. A ‘pragmatic approach’ in central banking appeared to be the norm in that period. While the provision of industrial finance proved the norm more than the exception, that approach did not match at all the best practice of central banking, i.e. the principles of independence and price stability, as it has long been postulated in the dominant macroeconomic theory until the financial crisis in 2007-8 and, more recently, the Covid-19 pandemic.
Overall, the main potential users of the project results will be the international community of economic historians.