BANKS, FREE BANKS, AND U.S. ECONOMIC GROWTH

Authors

  • MATTHEW JAREMSKI,

    1. Jaremski: Assistant Professor, Department of Economics, Colgate University, Hamilton, NY 13346. Phone 1-315-228-7524, Fax 1-315-228-7033, E-mail mjaremski@colgate.edu
    Search for more papers by this author
  • PETER L. ROUSSEAU

    1. Rousseau: Professor, Department of Economics, Vanderbilt University, Box 1819 Station B, Nashville, TN 37235; Research Associate, National Bureau of Economic Research, Cambridge, MA 02138. Phone 1-615-343-2466, Fax 1-615-343-8495, E-mail Peter.L.Rousseau@vanderbilt.edu
    Search for more papers by this author
    • The authors thank Howard Bodenhorn, Erwan Quintin, and three anonymous referees for their insightful comments and suggestions.


Abstract

The “Federalist financial revolution” may have jump-started the U.S. economy into modern growth, but the Free Banking System (1837–1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county-level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state-chartered banks seem to have strong and positive effects on manufacturing and urbanization. (JEL G21, N21, O43)

Ancillary