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THE SAMURAI BOND: CREDIT SUPPLY AND ECONOMIC GROWTH IN PRE-WAR JAPAN

Sergi Basco and John Tang

No 5, CEH Discussion Papers from Centre for Economic History, Research School of Economics, Australian National University

Abstract: While credit supply growth is associated with exacerbating financial crises, its impact on general economic activity and long run development are unclear. To identify a causal impact, we use bond payments to samurai in nineteenth century Japan as a quasi-natural experiment and exploit variation between regions. Our proxy for credit supply, samurai population shares, is positively associated with per capita levels of firm establishment and capital investment and average firm capital. Initial samurai population share affects output per capita in the short and long run only in regions with early access to railways, mainly through the tertiary sector. Our interpretation is that increased credit supply may have a positive and persistent impact on output if a region has productivity-enhancing investment opportunities.

Keywords: credit supply; finance-led growth; market access; railways (search for similar items in EconPapers)
JEL-codes: E51 N15 O47 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:auu:hpaper:056

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