Financial Systems, Economic Growth, and Globalization

Peter Rousseau and Richard Sylla

No 8323, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper brings together two strands of the economic literature -- that on the finance-growth nexus and that on capital market integration -- and explores key issues surrounding each strand through both institutional/country histories and formal quantitative analysis. We begin with studies of the Dutch Republic, England, the U.S., France, Germany and Japan that span three centuries, detailing how in each case the emergence of a financial system jump-started economic growth. Using a cross-country panel of seventeen countries covering the 1850-1997 period, we then uncover a robust correlation between financial factors and economic growth that is consistent with a leading role for finance, and show that these effects were strongest over the 80 years preceding the Great Depression. Next, we show that countries with more sophisticated financial systems engage in more trade and appear to be better integrated with other economies by identifying roles for both finance and trade in the convergence of interest rates that occurred among the Atlantic economies prior to 1914. Our results suggest that the growth and increasing globalization of these economies might indeed have been 'finance-led.'

JEL-codes: E44 F36 (search for similar items in EconPapers)
Date: 2001-06
New Economics Papers: this item is included in nep-dev, nep-fmk and nep-pke
Note: DAE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Published as Rousseau, Peter L. and Richard Sylla. "Financial Revolutions And Economic Growth: Introducing This EEH Symposium," Explorations in Economic History, 2006, v43(1,Jan), 1-12.
Published as Financial Systems, Economic Growth, and Globalization , Peter L. Rousseau, Richard Sylla. in Globalization in Historical Perspective , Bordo, Taylor, and Williamson. 2003

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