The Great Reversals: The Politics of Financial Development in the 20th Century

Raghuram Rajan and Luigi Zingales

No 265, OECD Economics Department Working Papers from OECD Publishing

Abstract: We attempt to identify and explain the broad patterns of financial development in developed countries over the twentieth century. We find that, contrary to the predictions of most existing theories, indicators of financial development do not seem monotonic over time. In particular, we find that by most measures, countries were more financially developed in 1913 than in 1980 and that a major reversal took place between 1913 and 1950. To explain this we outline a simple theory of the political economy of financial development. Empirically, our analysis suggests that the forces opposing financial development will be weaker when a country is open to international trade and capital flows. We find this to be true both in the cross-section and over time. In periods of free capital movement world-wide, a country’s level of financial development is directly related to its openness to trade. Similarly, the low frequency movements of financial development over time appear to be correlated ... Nous essayons d’identifier et d’expliquer les tendances générales dans le domaine du développement financier dans les pays développés au vingtième siècle. Nous trouvons qu’à l’encontre de toutes les prédictions des théories existantes, les indicateurs de développement financier ne varient pas de façon monotone dans le temps. En particulier, nous trouvons que d’après la plupart des indicateurs, les pays étaient financièrement plus développés en 1913 qu’en 1980 et qu’un revirement majeur a eu lieu entre 1913 et 1950. Afin d’expliquer ceci, nous décrivons une théorie simple de l’économie politique du développement financier. Empiriquement notre analyse suggère que les forces qui s’opposent au développement financier seraient plus faibles lorsqu’un pays est ouvert au commerce international et aux mouvements de capitaux. Ceci est vrai à la fois en coupe internationale et dans le temps. Dans les périodes où les mouvements internationaux de capitaux sont libres, le niveau de développement ...

Keywords: développement financier; financial development; financial systems; système financier (search for similar items in EconPapers)
JEL-codes: G15 G18 G28 N20 (search for similar items in EconPapers)
Date: 2000-10-12
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Citations: View citations in EconPapers (33)

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Working Paper: The Great Reversals: The Politics of Financial Development in the 20th Century (2001)
Working Paper: The Great Reversals: The Politics of Financial Development in the 20th Century (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:265-en

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