The Scandinavian Currency Union, 1873-1924
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The Scandinavian Currency Union, 1873-1924 Studies in Monetary Integration and Disintegration t15~ STOCKHOLM SCHOOL 'lJi'L-9 OF ECONOMICS ,~## HANDELSHOGSKOLAN I STOCKHOLM BFI, The Economic Research Institute EFIMission EFI, the Economic Research Institute at the Stockholm School ofEconomics, is a scientific institution which works independently ofeconomic, political and sectional interests. It conducts theoretical and empirical research in management and economic sciences, including selected related disciplines. The Institute encourages and assists in the publication and distribution ofits research fmdings and is also involved in the doctoral education at the Stockholm School ofEconomics. EFI selects its projects based on the need for theoretical or practical development ofa research domain, on methodological interests, and on the generality ofa problem. Research Organization The research activities are organized in twenty Research Centers within eight Research Areas. 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Director: Associate ProfBo Sellstedt. A dress EFI, Box 6501, S-113 83 Stockholm, Sweden • Internet: www.hhs.se/efi/ Telephone: +46(0)8-736 90 00 • Fax: +46(0)8-31 62 70 • E-mail [email protected] 2 The Scandinavian Currency Union 1873-1924 Studies in Monetary Integration and Disintegration Krim Talia Stockholm Scl~ool of Econon1ics STOCKHOLM SCHOOL OF ECONOrvllCS HANDELSJtOGSKOLAN.i STO(:KHOLM £F1, The 'Economic Rese.dteh Instilutt{ 3 Dissertation for the Degree of Doctor of Philosophy, PhD. Stockholm School of Economics, 2004. Printed by Partner Print AB, Stockholm © EFI and the author ISBN 91-7258-643-5 ISSN 1650 - 6766 Distributed by: EFI, The Economic Research Institute Stockholm school of Economics POBox 6501, SE1-113 38 Stockholm, Sweden www.hhs.se/efi 4 This book is dedicated to my family. My father Mansour Talia -There is no words to describe my respect and love for you. My mother Kerstin Talia -Without your support and never say die attitude, I wouldn't have had the courage to do this! My brother Aziz Talia -I admire and love you! In your presence I feel that everything will work out for the best. You are my rock! My sister Nadia Talia -Your warm personality, intelligence and humour makes me humble! I miss you here in Stockholm! Leave Lund! Who wants to live in Denmark? 5 6 Acknowledgements Writing a thesis is lonely and hard work. The writing process goes back and forth between periods of relative status quo - to long nights of furious writing. Your state of mind swings between periods of self doubt, and periods of triumphant joy over trivial things such as finding a picture of people making a queue outside a Central bank in 1914. To be given the opportunity to errlbark on such a journey and finally reach its destination has been a wonderful experience! This thesis owes a lot to the criticism, comments and support of my friends and colleagues. First of all, my supervisor Professor H&kan Lindgren who generously have shared his skills, enthusiasm and rich knowledge on financial history. Hitkan was the one that encouraged me to enter into the doctoral program and he has pointed me in the right direction ever since. Hitkan your importance for this thesis can hardly be overestimated! Thanks also to my other supervisors, Professor Lars Jonung and Professor Jaime Reis. Lars inspired me to choose the Scandinavian Currency Union as my dissertation topic and have generously shared his insights on the subject with me. My fellow PhD-students at EHF - the Institute for Research in Economic History at SSE, Bengt-Ake Berg, Harald Edqvist, Anders Engwall, Axel Hagberg, Erik Lakonlaa, Christoffer Rydland, Daniel Nyberg, Daniel Waldenstrom, and Anders Ogren has been a tremendous support. lowe Anders Ogren special thanks for our inspiring discussions and for surviving sharing an office with me for four years. I thank the participants at the EHF-seminars. Particularly Professor Sven Fritz and Professor Goran B. Nilsson for reading and commenting my work. I am also grateful to the participants at session no. 39, at the XIII Economic History Congress, in Buenos Aires 2002. Professor Lars G. Sandberg edited the entire thesis. You did a marvellous job, thank you very much! I am grateful to the staff and colleagues at the Department of Economics at SSE. Especially Britt-Marie Eisler and Pirjo Furtenbach for all administrative help, you've been great! My work on this thesis has been funded by the Jan Wallander and Tom Hedelius Foundation, to which I am truly grateful. 7 A very special thanks goes out to my friend and colleague Martin Korpi, at the Swedish Institute for Futures Studies, who again and again have read and commented on my work. Martin you are one of the most dedicated persons I have ever met, your wisdom and great sense ofhumour have been a tremendous support for me in all these years. Surely you can see your impact on this thesis, and me, and I hope I can return the favour! I would also like to thank my friends outside the academics for all vitalising coffee breaks etc: Anders Kalles, Erika Karlberg, Sara Lodin, Janos Nordqvist, Stefano Valentini, and Karl Renstrom and many more. Without you I am nothing. My dear friends Andreas and Giovanni Fili, two brothers with knife sharp intellect, great personal warmth and a wonderful sense ofhumour! You have been a great inspiration to me and you are always able to sheer me up! Hopefully our future business endeavours will be as given successes as IES! I am also grateful to Goran Svensson For being such a positive injection in my life! My best to Mariamle and little Ceasar! Finally, my wonderful girlfriend Maja HuIter, who carried the weight of this thesis with me for five long years. I love you! Stockholm in May, 2004. Krim Talia 8 Contents CHAPTER 1 Four Studies in Monetary Integration and Disintegration: Introduction and Summary 15 1 Introduction 17 2 Previous Historical Research on the SCU and other Monetary Unions 19 3 Theory 22 3.1 Institutional Theory and Rational Choice 22 3.2 Monetary Theory, Unions and Regimes 24 3.3 The Gold Standard in Theory and Practice 25 4 Method and Sources 28 4.1 Qualitative Method and Sources 28 4.2 Quantitative Method and Sources 29 5 Summarizing the Thesis 31 6 Some Personal Reflections and an Outline for Future Research 34 References 36 CHAPTER 2 Scandinavian Monetary Integration During the 19th Century: A Study of the Establishment of the_Scandinavian Currency Union,1865-1875 39 1 Introduction 41 1.1 The Goals of the Paper 41 1.2. Sources and Methods 43 1.3 Previous Research 44 1.3.1 On the Origins of the Scandinavian Currency Union 47 1.3.2 The Problem Revisited 49 9 14 - Chapter 1- Four Studies in Monetary Integration and Disintegration Introduction and Summary Krim Talia Stockholm School of Economics 15 The Scandinavian Currency Union 1873-1924 Figure 1. Scandinavian Gold Coins. 1. Note: [J}. Danish Scandinavian JO Kroner from 1873. With Christian IX, King of Denmark [2}. Swedish Scandinavian 10 Kronor from 1875. With the Oscar II, King ofSweden and Norway. [3]. Norwegian Scandinavian 10 Kroner form 1910. With the New King of Norway Haakon VII. (© Copyright Kungliga Myntkabinettet, Box 5428,1J484 Stockholm Sweden, Foto: Gabriel Hildebrand) Figure 2. Scandinavian Gold and Token Coins. 2. 3. Note: [1}. Swedish Scandinavian (Gold) 20 Kronerfrom 1899. With the Oscar IL King ofSweden and Norway. [2}. Swedish Token Coin (Silver), from 1875. 1 Krona, With Oscar IL King ofSweden and Norway. [3}. Danish Token Coin, (Silver) 1 Krone, form 1875. With Christian IX, King ofDenmark (© Copyright Kungliga Myntkabinettet, Box 5428, 11484 Stockholm Sweden, Foto: Gabriel Hildebrand). 16 Introduction andSummary 1 Introduction l This thesis examines the ebb and flow of monetary integration in Scandinavia during the period 1865-1924. The first fifty of these years were a period of widespread industrialization and ever increasing world wide trade and economic globalization. It was the heyday of the classical gold standard, under whose auspices western economies experienced an unprecedented era of growth, stability and peace. Tragically, however, this "golden" age was followed by the death and destruction ofWorld War I. These events form the backdrop to the history ofthe Scandinavian Currency Union