In this paper we present a new method for estimating market integration under a
commodity money system such as that which existed in Europe until the demise of the
gold standard. The approach is based on the analysis of deviations between exchange
rates and parity, which under conditions of a perfectly functioning and fully integrated
market should not exceed the bullion points. Consequently the time needed for
adjustment, following a violation of the bullion points, can be used as an indicator of
market imperfections and as a measure of integration. We apply this approach to trade
between late medieval Flanders, Lübeck and Prussia, our results showing that Flanders-
Lübeck constituted a much better-integrated market than Flanders-Prussia. Moreover,
the results indicate that the degree of market integration increased between the early
fourteenth and the middle of the fifteenth century.
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