Capital Markets in China and Britain, 18th and 19th Century: Evidence from Grain Prices

NBER Working Paper No. 21349

Issued in July 2015, Revised in May 2018

NBER Program(s):Asset Pricing, Development of the American Economy, Economic Fluctuations and Growth



Based on the most comprehensive grain prices available, we employ a storage model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British average at distances below 200 kilometers, but at larger distances interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market divergence at an early date.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w21349

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