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Discussion Paper Details

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Title: The Origination and Distribution of Money Market Instruments: Sterling Bills of Exchange during the First Globalisation

Author(s): Olivier Accominotti, Delio Lucena and Stefano Ugolini

Publication Date: October 2019

Keyword(s): bill of exchange, Industrial Organisation, information asymmetry and money market

Programme Area(s): Economic History and Financial Economics

Abstract: This paper presents a detailed analysis of how liquid money market instruments - sterling bills of exchange - were produced during the first globalisation. We rely on a unique data set that reports systematic information on all 23,493 bills re-discounted by the Bank of England in the year 1906. Using descriptive statistics and network analysis, we reconstruct the complete network of linkages between agents involved in the origination and distribution of London bills. Our analysis reveals the truly global dimension of the London bill market before the First World War and underscores the crucial role played by London intermediaries (acceptors and discounters) in overcoming information asymmetries between borrowers and lenders on this market. The complex industrial organisation of the London money market ensured that risky private debts could be transformed into extremely liquid and safe monetary instruments traded throughout the global financial system.

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Bibliographic Reference

Accominotti, O, Lucena, D and Ugolini, S. 2019. 'The Origination and Distribution of Money Market Instruments: Sterling Bills of Exchange during the First Globalisation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14058