Håkan Lobell

The Range of Stockholm-Hamburg and Stockholm-London Specie Points 1834−1880¹

Growing international trade and investment was one important characteristic of the 19th century international economy. Nevertheless, exchange rates became increasingly stable. This paper explores how decreased costs for transactions in silver and gold contributed to increased exchange rate stability in Sweden between 1845 and 1880. Under a specie standard, transaction costs incurred in silver or gold arbitrage influence the exchange rate range. Two estimates of transaction costs, based on records from the Riksbank and parliamentary auditors, indicate that falling costs of specie transactions and arbitrage narrowed the width of the exchange rate range from 4 to 6.5 per cent to 0.7 to 1 per cent of parity between 1845 and 1880. Decreased commission, brokerage, tax and insurance were the main contributors to integration. Direct transport costs did not contribute to integration to the same extent, as their share of transaction costs was small with regard to silver and gold. The Riksbank played an important role by providing an effective lower intervention point at parity from 1845 until 1870.

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