TY  - JOUR
AU  - Landon-Lane,John
AU  - Rockoff,Hugh
TI  - Monetary Policy and Regional Interest Rates in the United States, 1880-2002
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10924
PY  - 2004
Y2  - November 2004
UR  - http://www.nber.org/papers/w10924
L1  - http://www.nber.org/papers/w10924.pdf
N1  - Author contact info:
John Landon-Lane
Department of Economics
75 Hamilton Street
Rutgers University
College Avenue Campus
New Brunswick, NJ  08901-1248
E-Mail: lane@econ.rutgers.edu

Hugh Rockoff
Department of Economics
75 Hamilton Street
Rutgers University
College Avenue Campus
New Brunswick, NJ  08901-1248
Tel: 609/897-0117
Fax: 732/932-7416
E-Mail: rockoff@fas-econ.rutgers.edu
AB  - The long running debate among economic historians over how long it took regional financial markets in the United States to become fully integrated should be of considerable interest to students of monetary unions. This paper reviews the debate, discusses the implications of various hypotheses for the optimality of the US monetary union, and presents some new findings on the origin and diffusion of monetary shocks. It appears that financial markets were integrated in the late nineteenth and early twentieth centuries in the sense that monetary shocks were routinely transmitted from one part of the United States to another. In particular, shocks to interest rates in the eastern financial centers were routinely transmitted to the periphery. However, it also appears that during this period significant shocks to bank lending rates in the periphery often arose on the periphery itself. This suggests that a nineteenth century monetary authority that relied on operations confined to eastern financial centers would have had a difficult time managing the U.S. monetary union. After World War II the problem of eruptions on the periphery declined.
ER  -