Abstract

Currency competition provided a stable monetary standard in those Swiss cantons that deregulated their financial systems after liberal revolutions in the 1830s and 40s. The Swiss currency issuers’ concern with purchasing power stability suggests that each of them faced a real demand for notes that was sensitive to expected changes in the purchasing power of those notes. Given purchasing power stability, the circulation of a currency depended on the quality of the financial services of its issuer. Issuing and keeping notes in circulation was costly. The share of notes in the balance sheets of their issuers was therefore small except in periods when interest rates on other debt instruments were high.