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International financial flows, domestic banks, and the economic development of the periphery:Italy, 1861-1913

Paolo di Martino, Barbara Pistoresi () and Alberto Rinaldi ()

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: This paper analyses the impact of different sources of financing (foreign capital, migrants’ remittances, and domestic banks intermediation) on economic development in Italy between 1861 and WWI. Existing literature has analysed the role of these channels of financial intermediation separately, while this paper for the first time considers them in conjunction. Using IRF from a Cholesky identification structure of a VAR model and relying on an original dataset that combines the most recent series of several financial and economic aggregates, this paper shows that both international capital and domestic saving had a significant impact on investment, while remittances did not. Foreign capital was invested directly, but also via domestic banks, in particular the “German-style” universal banks. Finally, foreign and domestic capital had different attitudes towards the types of investment (construction vs. plant, machinery and transport equipment) and industries they financed. Combined together, these results shed a new light on the process of economic development of Italy and, more generally, of peripheral economies in the age of the international gold standard.

Keywords: prisoner dilemma; assortativity; cultural aversion; cooperation; type-monomorphic. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his
Date: 2016-12
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