Discussion paper

DP3684 Monetary Union, Institutions and Financial Market Integration, Italy 1862-1905

The Paper draws its motivation from the observation that, three years into the single currency, EMU financial markets are making only slow progress towards integration and from the belief that economic history can offer useful insight as to the causes of the phenomenon. In this vein, we investigate a previous case of financial market integration in the wake of monetary unification, that of Italy after 1862.

We find that the prices of the Rendita Italiana 5% (Italian Consols) across regional stock exchanges did not fully converge until 1887, twenty five years after the creation of a ?monetary union? in the peninsula. Regression analysis shows that variables such as the spread of ICT, trade volumes and the diffusion of the ?single currency? fail to explain the delay in financial market unification.

We argue that markets remained relatively fragmented because local vested interests resisted the legal and regulatory changes needed to make arbitrage across individual stock exchanges efficient.

A single Italian financial market appeared only when the State imposed more uniform financial market legislation nationwide, a fact that the EU should perhaps not overlook.


Toniolo, G, G Vecchi and L Conte (2003), ‘DP3684 Monetary Union, Institutions and Financial Market Integration, Italy 1862-1905‘, CEPR Discussion Paper No. 3684. CEPR Press, Paris & London. https://cepr.org/publications/dp3684