Domestic monetary transfers and the inland bill of exchange markets in Spain (1775–1885) J. Carles Maixe ´ -Alte ´s a , Emma M. Iglesias b, * a Departamento de Economı ´a Aplicada I, Universidade da Corun˜a, Campus de Elvin ˜a s/n, 15071 A Corun ˜a, Spain b Department of Economics, Michigan State University,101 Marshall-Adams Hall, East Lansing, MI 48824-1038, USA Keywords: Domestic monetary transfers Integration of monetary markets Inland bill of exchange rate in Spain Eighteenth and nineteenth century Monetary and financial history abstract This article studies the monetary transfers system that was created by the short-term inland bill of exchange markets. For decades this system was the most practical way of channeling the growing volume of transfers which were taking place as a consequence of the growth of the Spanish economy. This analysis argues that, between 1775 and 1885, the markets involved in this activity became progressively more efficient, due largely to the multi- lateralization of the payment system. This situation lasted longer in Spain than in the rest of Europe since Spanish banking was, initially, slower to develop. Using univariate and multivariate GARCH models, it was possible to conclude that the inland bill of exchange markets constituted an essential monetary instrument, and one that faithfully reflects the integration of monetary markets in Spain. Ó 2008 Elsevier Ltd. All rights reserved. 1. Introduction There is now quite a lot of information on the nineteenth century Spanish financial system avail- able. 1 In general terms, it has been demonstrated that there were important advances during the nineteenth century in the modernization of Spanish financial markets and institutions. * Corresponding author. E-mail addresses: maixe@udc.es (J. Carles Maixe ´ -Alte ´ s), iglesia5@msu.edu (E.M. Iglesias). 1 The pioneering papers by Sa ´nchez Albornoz (1968), Tortella (1970, 1973), Tedde (1974), and Anes-A ´ lvarez (1974), which appeared 30 years ago, helped to clarify what best characterized the Spanish banking system, and of some of its monetary variables. Subsequently, these same authors, together with Martı ´n Acen ˜ a, Garcı ´a Lo ´ pez, Sudria ` , and Castan ˜ eda, have gone into greater detail concerning the early stages of the development of banking, monetary policy, monetary standards and the expansion of the Bank of Spain and its financial services: see Sa ´nchez Albornoz (1977), Tedde (1984, 2000), Tortella (1999, 2001), Martı ´n Acen ˜a (1985, 1990, 2000), Garcı ´a Lo ´pez (1985, 1987), Sudria ` (1982, 1995) and Castan ˜ eda (2001a). Contents lists available at ScienceDirect Journal of International Money and Finance journal homepage: www.elsevier.com/locate/jimf 0261-5606/$ – see front matter Ó 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.jimonfin.2008.11.001 Journal of International Money and Finance 28 (2009) 496–521