The Money is in the Mail: The evolution of the global Postal Money Order network

Abstract

Starting in the second half of the 19th century national postal services expanded their domestic money order systems with the possibility to transfer money overseas. This was based on a network of bilateral arrangements between countries spanning around the globe. At the height of the First Globalization the system allowed the easy and cheap transfer of money internationally for wide swaths of the population. This paper explores the drivers of the structure and expansion of the international network at the turn of the 20th century, in particular identifying the role of country characteristics, network effects, and the interaction with other global financial networks, including currency notations, capital flows, and multinational banking. The analysis uses a SIENA network simulation approach to address potential endogeneity within the network. Country characteristics relating to trade, financial investments, and administrative capacity played an important role; additionally network effects shaped the expansion while there were apparently almost no interaction with other financial networks. This is then compared to the factors shaping the countries’ participation in one multilateral institutional framework for this expansion, namely the membership in the Universal Postal Union and its special agreements on postal money orders.