Foreign Capital in 19th Century Spain's Investment Boom

Leandro Prados de la Escosura ()

IFCS - Working Papers in Economic History.WH from Universidad Carlos III de Madrid. Instituto Figuerola

Abstract: Spain experienced an investment boom over 1850-1874. Historians attributed a significant role to foreign capital inflow. Sudrià (2018) challenged the consensus on the basis of Moro, Nuño, and Tedde (2015) capital balance account estimates that imply a much lower capital inflow. Dishoarding of bullion and previous savings would have catered for an increasing investment demand providing the means to meet the current account deficit without causing deflation. It is argued here that the empirical basis for Sudrià's claim is flawed. Moro et al. (2015) direct appraisal of the capital balance account resulted in an underestimate of the net capital inflow and a substantial upward bias of the change in reserves. The current account deficit resulted from an inflow of capital that allowed investment to raise facilitating imports of capital goods and raw materials. Foreign capital made a significant contribution to the investment boom of 19th century and boosted Spanish performance.

Keywords: Spain; Capital; Inflow; Investment; Balance; of; Payments; Saving; Growth (search for similar items in EconPapers)
JEL-codes: F21 F32 N13 (search for similar items in EconPapers)
Date: 2018-02-01
New Economics Papers: this item is included in nep-acc and nep-his
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