Market Integration in the Golden Periphery: The Lisbon/ London Exchange, 1854-1891

Abstract

The existence of a self-regulating arbitrage mechanism under the gold standard has been traditionally considered as one of its main advantages, and attracted a corresponding research interest. This research is arguably relevant not only to test for the efficiency of the "gold points", but also to study the evolution of financial integration during the so-called first era of globalization. Our first aim with this paper is to contribute to the enlargement of the scope of the literature by considering the case of Portugal that adhered to the system, in 1854, at a much earlier phase than the majority of countries, thus allowing for a broader perspective on the evolution of the efficiency of the foreign exchange market. As a typical "peripheral" country, Portugal can be used as the starting point for a study of the degree of integration of the periphery within the system. Furthermore, the Portuguese exchange also illustrates the role in practice of large players in sustaining currency stability, over and beyond the atomistic forces of arbitrage and speculation assumed in conventional theoretical frameworks. We also address the question of the credibility of the authorities' commitment to the standard, through the perspective of the target zone literature.

International credit market integration in northwestern Europe in the 1670s

“…In the literature, scholars address financial market integration against two different means of international payment (Canjels et al 2004; Volckart and Wolf 2006; Esteves et al 2009; Li 2015). Merchants can either send bills of exchange or ship bullion (gold or silver) to make international payments.…”

The Price of Stability: The balance sheet policy of the Banque de France and the Gold Standard (1880-1914)

“…Notwithstanding very different central banking practices, domestic objectives and interpretations of the so-called "rules of the game", the gold standard still worked as a credible rule. 31 Foreign exchange interventions were another usual tool -in addition to gold devices -which was mainly used by small central banks to stabilize the exchange rate and isolate partly domestic economies from international shocks (Reis 2007, Esteves et al 2009, Jobst 2009, Ugolini 2012. The objective and operations of the Banque de France were different in kind and in quantity.…”

Competing Bimetallic Ratios: Amsterdam, London, and Bullion Arbitrage in Mid-Eighteenth Century

“…28588) and Quinn (1996). The specie-point mechanism was first calculated for the case of the classical gold standard (Morgenstern 1959;Clark 1984;Marcuzzo and Rosselli 1987;Officer 1983Officer , 1986Officer , 1989Officer , 1996Canjels, Prakesh-Canjels, and Taylor, 2004;Esteves, Reis, and Ferramosca, 2009). Flandreau (1995Flandreau ( , 1996Flandreau ( , 2002Flandreau ( , 2004 extended the notion of gold points for the gold standard to bimetallic points for the bimetallic standard in the nineteenth century.…”