Money and Business Cycles in the U.S. and U.K., 1870 to 1913

Forrest H Capie and Terence C Mills

The Manchester School of Economic & Social Studies, 1991, vol. 59, issue 0, 38-56

Abstract: This paper examines the cyclical relationship between money and output for both the U.S. and U.K. during the years leading up to 1914. New data series for the U.S. output and U.K. money are used and a variety of time series techniques are employed. The results show that there is a strong cyclical money-output relationship in the U.S. but rather weak one in the U.K. Our explanation is based on the fact that there were no financial crises or banking panics in the U.K. and consequently less volatility in the monetary series. This, we argue, is a consequence of both the Bank of England acting as a lender of last resort and of the development of a branch banking structure, neither of which was a feature of the U.S. banking system in this period. Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:59:y:1991:i:0:p:38-56

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