The era of free banking in the state of New York featured the competitive issue of money by banks. The results of this research provide support for the argument that banking during this period was not an anomaly, but an example of the effects of competition in a free market. This is done by establishing a link between bank reputations and the discount at which their notes traded. Quality is important and can be discerned through the use of reputations as a proxy, and thus can act as a stabilizing force in competitive markets where quality is difficult to recognize.
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