Activities - Summaries
The Ottoman Financal Structure and the Istanbul Stock Exchange
Zafer Toprak
During the nineteenth and early twentieth centuries, Ottoman
financial developments were part of the empire's general integration
with European and world economies. In this, one key factor
was the rapid growth in trade between the Ottoman Empire and
the leading countries of Europe. The injection of money through
foreign trade dismantled the self sufficient, closed economic
circuits. Internal trade in hard currency more than tripled
within three decades. Likewise, the volume of circulation
media increased around four times before the Ottoman Empire
defaulted on its obligations in 1875.
A second key factor in the integration of the Ottoman Empire
with the outside world was the inflow of capital. With the
modernisation of the military and civil bureaucracy, the Ottoman
demand for capital increased faster than revenue intake throughout
much of the nineteenth century and early twentieth century.
The demand for capital, and subsequent attempts to develop
domestic sources of revenue through taxes, were crucial for
the Empire's structural changes in search of a modern state.
The Istanbul Stock Exchange played a major role in Ottoman
financial history. From the middle of the nineteenth century,
it was the nucleus of Istanbul's financial markets, and provided
a centralised location for trade in Ottoman treasury bonds,
corporate stocks and bonds, and foreign currencies. By operating
as a full secondary market, it increased the efficiency with
which the government could borrow funds. Centralised trading
helped to increase liquidity in the financial markets, while
bond issues provided an important alternative to bank financing
in the Ottoman Empire.
The Exchange also played a major role in the dissemination
of information. By the later 1800's, Istanbul was connected
to the European markets by telegraph, and news and events
in Europe often affected the market on the same day. Through
its growth and development, the Istanbul Stock Exchange paved
the way in the adoption of new European techniques of financing,
such as join-stock funding for urban amenities, and helped
advance Ottoman financial and economic development.
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