The Scandinavian Currency Union 1873-1924 : studies in monetary integration and disintegration

Abstract: This thesis studies the history of the Scandinavian Currency Union, 1873-1924. It is divided into four analytical chapters, each dealing with a different aspect of the Union and each written as a separate paper. The conclusions of the thesis challenge existing views of the Union and examines new aspects of this episode in monetary history. It poses new questions and exploits and evaluates new sources. The first paper offers an original interpretation of the role of Scandinavianism in the monetary reform of 1873-1875. It is argued that its importance has been both exaggerated and misinterpreted. In fact, the monetary integration of those years was principally motivated by economic considerations. The second paper deals with inter Scandinavian monetary cooperation during the period 1873-1914. It argues that the process of monetary integration, later followed by disintegration, during these decades is best understood in the context of a trade off between financial efficiency and national economic vulnerability.  It provides a comprehensive analysis of the motives that underlay the principal extensions of the Union’s institutional framework.This includes, the formation, cancellation and renegotiation of the formal, Union based, clearing agreement, as well as the process leading to the free circulation of all Scandinavian notes throughout the currency area.The third paper studies the level of integration and efficiency of the Scandinavian foreign exchange market throughout the period. The paper applies theories and methods from modern economics and finance on a new set of historical financial data. It concludes that the currency union generally, and the clearing agreement in particular, significantly increased the degree of market integration. It also concludes that, during most of the period, the Scandinavian foreign exchange market was characterized by perfect arbitrage and efficiency. The final paper challenges the prevailing scholarly view of the dissolution of the Union. It argues that the break up resulted from the asymmetric shocks that the three countries experienced during World War I. These shocks, which differed as a result of varying national economic policies and structures, created tensions that required exchange rate adjustments to be resolved.