The essays in this Special Issue were initially written for the first Past, Present and Policy meeting, a New Economic History Panel, that was held in Vienna, 30 September–1 October 2005. This panel was designed by Marc Flandreau and is currently sponsored by the Chaire de Finances Internationales at the Institut d'Etudes Politiques de Paris, and by the Centre for Economic Policy Research in London. The Vienna meeting, known as PPP1, was hosted and sponsored by the Austrian National Bank.

The term financial revolution has been abused in the literature. Revolution connotes a sharp and unique break from the past that should stand up to careful historical scrutiny, but in fact it does not. Evolution describes financial history better than revolutions. We compare the classic ‘financial revolutions’ with the financial innovations of Genoa, Venice and Florence in the Quattrocento and Cinquecento and the upshot is that these Italian city-states – the two maritime cities more than Florence – had developed many of the features that were to be found later on in the Netherlands, England and the United States. The importance of the early financial innovators has been eclipsed by the fact that these city-states did not survive politically. Instead, the innovations were absorbed in the long chain of financial evolution and, in the process, lost the identity of their creators.

By 1914, the London Stock Exchange listed and traded one-third of the public capital available to investors anywhere in the world. No other exchange could match it in terms of scale and scope of securities on offer, or in terms of the number of stockbrokers available to potential customers. The reason, we argue, is that the microstructure of the London Stock Exchange was also unique. The owners of the exchange (Proprietors) left governance of the exchange to the users of the exchange (Members). Because the owners of the exchange could only increase revenue by increasing the number of users, newer members constantly sought new sources of revenue through financial innovations. The evolution of the London Stock Exchange's microstructure was path-dependent – the initial conditions for membership set the separate incentives for the owners and operators of the exchange, and these determined how they responded to successive shocks over time. Path dependency, unfortunately, eventually led to decreasing effectiveness and innovation by the members over time.

This study deals with the price building process of cross-listed stocks on the most important European stock exchanges in the 1870s. By applying a vector error correction approach we look for cointegration relationships. Obviously, there was already a high degree of cross-border integration. Furthermore, we observe the uncommon phenomenon that it was not the home market Vienna but the foreign market Berlin which was the dominant one in the price-building process. An explanation could be the intense speculation during the 1870s in Berlin. Therefore, cross-listed stocks worked as a vehicle for spreading the ongoing speculation from Berlin to other places.

Although the macroeconomics of Latin America during the first wave of globalisation has been largely documented, key microeconomic aspects remain insufficiently studied. This is the case for the process of the foreign bank penetration driven by British and German banks. The article analyses the historical experiences of Chile and Brazil with foreign banks between 1878 and 1913. Based on newly available bank balance sheet data for each country, we searched for evidence of differences in the financial behaviour between local and foreign (British and German) banks as well as possible competition effects induced by foreign entry. In line with the results of the vast literature on the present wave of foreign bank entry into developing countries, we find that, on the whole, foreign and domestic banks behaved differently and that the impacts of British and German bank penetration in Brazil and Chile tended to be positive.

Despite a stream of information from recent research, as well as analytical interpretations, we still lack a general picture of pre-1914 multinational banking based on a unifying empirical approach comparable to that recently developed by financial economists for the wave of banks' multinational expansion in the late twentieth century. The main purpose of this article, based on a unique dataset covering the foreign branches of British, French and German banks from 1880 to 1913, is to test in a similar theoretically-driven fashion the determinants of multinational banking during the first globalisation. The empirical strategy is based on an augmented gravity model in which geography and institutions interact with economic factors in determining the patterns of multinational banking. Contrary to what has emerged from recent studies on present multinational banking, I find that the ‘fundamentals’ of pre-1914 foreign branching cannot easily be fitted into a gravity-like model, and that no unifying pattern of foreign expansion can be inferred from the data.

Since the early 1997 paper by La Porta et al., a growing body of research has argued that ‘legal origins’ have a country-specific, time-invariant effect on property rights and economic development. Following the methodology of La Porta et al., an original database of 51 bankruptcy laws has been built: it ranges over 15 European countries and more than a hundred years (1808–1914), and summarises how the rights and incentives of the parties were defined as the procedures unfolded. The first conclusion is that, over the entire period, all legal traditions strongly protected creditors' rights; only English law comes out prima facie as less protective. Second, evidence suggests that the evolution of these laws was influenced less by their past than by continent-wide trends, arguably linked to capitalist development. An early nineteenth century model thus saw heavy repression of failed debtors and highly regulated judicial procedures. After a transition period from the late 1860s to the late 1880s, prison for debt was abandoned, rehabilitation became easier, and the parties were given much more room to recontract on property rights.

Recent cross-country investigations of the role of institutional fundamentals, such as the protection of property rights, in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this article we pursue this new direction by considering relationships between finance, growth, legal origin, and the political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a country's legal origin (such as English, French, German, or Scandinavian) and financial development are for the most part consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper fundamentals, however, a significant part of the growth-enhancing role of financial development remains unexplained by them.