The note issue banking system in México, 1897- 1910: A macroeconomic stability experience

Congreso; Latin American and Caribbean Economic Association; 2006

This article is intended to determine whether the late nineteenth and early twentieth century Mexican banking system was stable, focusing on two main fields of study: the issue of notes and bank panics. The results obtained reveal that the system was stable regarding the issue of notes. A limit existed on the amount of notes that were issued by Banamex, the most important (and privileged) bank. That limit was in line with the optimum level, the one that would ensure maximum firm profit. The system was able to overcome the banking system panic caused by the international economic crisis of 1907-08 without imposing losses on depositors and with no fiscal cost. That was possible by opportune state intervention that made the cleansing of the system attainable without social costs.