‘High and dry’: the liquidity and credit of colonial and foreign government debt in the London Stock Exchange (1880–1910)

Matthieu Chavaz and Marc Flandreau

No 555, Bank of England working papers from Bank of England

Abstract: We gather the most comprehensive database of government bonds for the first globalisation era to date to conduct the first historically informed study of the importance of liquidity for colonial and sovereign yield spreads. Considering both liquidity and credit shows that the two markets were segmented: credit was the most important factor in the pricing of sovereign debt, but liquidity predominated in the colonial market, explaining 10% to 39% of colonial yield spreads. This reflected both different market microstructures and bond clienteles, themselves influenced by heterogeneous political, institutional and financial arrangements. The flows from the colonies to British ‘ordinary’ investors in the form of illiquidity premia should be taken into account in future studies of the political economy of empire.

Keywords: Government bonds; British Empire; liquidity; credit risk; colonial finance (search for similar items in EconPapers)
JEL-codes: G12 N23 N43 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2015-10-06
New Economics Papers: this item is included in nep-fmk and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... C18A686519FD43553C9E Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0555

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().