Abstract
This article contributes to a deeper understanding of how financial development impacts money market integration in traditional society. We construct a province-pair dataset of piaohao (Shanxi banks) and silver–copper exchange rates to analyze this problem. We find that the establishment of piaohao significantly promoted the convergence of silver–copper exchange rates between regions. The effect of piaohao is weaker for province pairs where transportation and information transmission are more costly. Piaohao can also suppress the dispersion of the silver–copper exchange rate caused by extreme weather. Clustering the piaohao industry is a plausible channel.
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