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The impact of the Scandinavian Monetary Union on financial market integration

Published online by Cambridge University Press:  05 November 2007

Lars Fredrik Øksendal
Department of Economics, Norwegian School of Economics and Business Administration, Helleveien 30 N 5045 Bergen, Norway,


In the period from 1877 until the outbreak of World War I, Sweden, Denmark and Norway constituted a currency area – the Scandinavian Monetary Union (SMU). They shared the same unit of account, the gold krone. Both full-bodied gold coins and token coins of the three countries served as legal tender and circulated freely within the union. Initially set up to preserve the traditional circulation of neighbouring coins in the border regions, the central bank cooperation was extended to a mutual settlement mechanism (1885) and later reciprocal acceptance of notes at par (1901). A desire for economic integration was present under the surface of this practical approach, mirroring the predominant liberal worldview of the 1870s. For instance, the Norwegian government saw a common coinage as an instrument for ‘knitting together the three nations to a single commercial territory. In the parliamentary debate on Norwegian entry into the union a supporter argued that ‘the real objective of unity in coin had to be to bring the countries closer together’. Thus, from the outset, the SMU was a combination of practical arrangements and lofty ambitions.

Research Article
Copyright © European Association for Banking and Financial History 2007

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1 In writing this article I have benefited from stimulating discussions with Jan Tore Klovland, Stig Tenold, Ola Grytten, all from the Norwegian School of Economics and Business Administration, as well as Magnus Lindmark of the University of Umeå. I acknowledge their contributions as well as the valuable suggestions made by the anonymous referees of this journal.

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7 Ibid., pp. 51–5. The gold points had previously been around 0.067%.

8 Ibid., p. 51.

9 Ibid., p. 58.

10 Ibid., pp. 63-4. From 12 January 1910 to 2 March 1912 Norges Bank charged a quarter pro mille for drafts on Nationalbanken, subsequently increased to half pro mille. Drafts on Riksbanken were also subjected to charges. From 28 June 1910 to 22 February 1911 Nationalbanken charged a quarter pro mille on drafts both on Norges Bank and Riksbanken and then increased twice to half and 1 pro mille respectively. Keilhau claims that the Norges Bank had already implemented a surcharge on drafts on Riksbanken 1907 of a quarter pro mille. Keilhau, W., Den norske pengehistorie (Oslo, 1952)Google Scholar.

11 Between 1905 and 1913 the volume of returned Danish and Norwegian notes from Sweden doubled while return of Swedish notes from Denmark was reduced by more than 90%. Nielsen, Et historisk rids, p. 64.

12 These points were estimated to be between one-third and half pro mille. Ibid., p. 66.

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18 Ibid., p. 513.

19 Jonung, ‘Den skandinaviske myntunionen’, p. 8.

20 Flandreau and Maurel, ‘Monetary union, trade integration and business cycles’, pp. 137–40.

21 Flandreau, ‘The economics and politics of monetary union’, p. 31.

22 Flandreau, M., ‘The bank, the states, and the market: an Austro-Hungarian tale for Euroland, 1867–1914’, in Capie, F. and Woods, G. (eds.), Monetary Unions: Theory, History, Public Choice (London, 2003)Google Scholar.

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26 Ibid., p. 32.

27 Ibid., pp. 110–12.

28 Ibid., pp. 120–2.

29 Ibid., p. 147.

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36 Norges Bank, Annual report, 1911.

37 Nielsen, Et historisk rids, pp. 63–4.

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41 See, for instance, Farmand, 5.6.1897, 12.6.1897, 4.6.1898, 10.12.1898, 11.5.1901, 14.12.1901, 31.5.1902, 7.6.1902, 14.6.1902, 23.5.1903, 4.6.1904, 26.11.1904, 9.12.1905, 1.12. 1906, 17.12.1910.

42 See, for instance, Norges Bank, Annual report, 1906.

43 See, for instance, Farmand, 13.4.1907, 20.4.1907 and 4.5 1907.

44 Farmand, 27.8.1904.

45 Farmand, 6.3.1897.

46 Norges Bank, Annual report, 1899.

47 Grytten, O. H., ‘The gross domestic product for Norway 1830–2003’, in Ø. Eitrheim, J. T. Klovland and Qvigstad, J. F. (eds.), Historical Monetary Statistics for Norway 1819–2003, Norges Bank Occasional Papers, no. 35 (Oslo, 2004)Google Scholar.

48 Farmand, 23.3.1907.

49 See, for instance, Farmand, 29.2.1896, 7.3.1896, 18.4.1896, 9.5 1896, 1.5.1897, 5.6 1897, 14.12.1901, 4.6.1904, 26.11.1904, 2.12.1905, 21.12.1907.

50 Norges Bank, Annual reports, 1900–13.

51 L. F. Øksendal, ‘Monetary policy under the gold standard – examining the Norwegian evidence, 1893–1914’, paper presented at the Sixth Conference of the EHES, Istanbul 9–10 September 2005.