Emerging financial markets and early US growth

Abstract

Studies of early U.S. growth traditionally have emphasized real-sector explanations for an acceleration that by many accounts became detectable between 1815 and 1840. Interestingly, the establishment of the nation's basic financial structure predated by three decades the canals, railroads, and widespread use of water and steam-powered machinery that are thought to have triggered modernization. We argue that this innovative and expanding financial system, by providing debt and equity financing to businesses and governments as new technologies emerged, was central to the nation's early growth and modernization. The analysis includes a set of multivariate time series models that relate measures of banking and equity market activity to measures of investment, imports and business incorporations from 1790 to 1850. The findings offer support for our hypothesis of "financeled" growth in the U.S. case. By implication, the interest today in improving financial systems as a means of fostering sustainable growth is not misplaced.

Finance and Balanced Growth

“…The early empirical work of King and Levine (1993a,b) suggested that financial depth is an important part of what explains variations in growth across countries. The robustness of that connection has been supported by subsequent studies such as Demirgüç-Kunt and Maksimovic (1998), Levine et al (2000) and Rousseau and Sylla (2005). 1 A number of other results have suggested that the empirical evidence is not consistently positive, however.…”

Four Centuries of British Economic Growth: The Roles of Technology and Population

“…59-93). The establishment of the Bank of England in 1694, and the introduction of a money market, checks and an active stock exchange in the late 17 th century have been described as a financial revolution (Deane, 1969, Ch 11;Rousseau and Sylla, 2005). Furthermore, notes issued by the Bank of England and by private banks in the 17 th and 18 th centuries, were essential for the development of a modern financial system (Deane, 1969, Ch 11).…”

“…Furthermore, notes issued by the Bank of England and by private banks in the 17 th and 18 th centuries, were essential for the development of a modern financial system (Deane, 1969, Ch 11). The ratio of broad money to GDP is used here as a proxy for financial development, which is standard in the literature on financial development and growth (see, e.g., Rousseau and Sylla, 2005;Ang and McKibbin, 2007;Ang, 2010).…”

Asymmetric cointegration and causality effects between financial development and economic growth in South Africa

“…al. (2001); Rousseau (2003); Rousseau and Sylla (2005)) as well as in emerging economies (Khan and Senhadji (2003); Eita and Jordan (2007) ;Akinlo and Egbetunde (2010) ;Acaravci et. al.…”