Emerging Financial Markets and Early U.S. Growth

Peter Rousseau and Richard Sylla ()
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Richard Sylla: Department of Economics, Leonard N. Stern School of Business, New York University

No 15, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: Studies of early U.S. growth traditionally have emphasized real-sector explanations for an acceleration that by many accounts became detectable between 1815 and 1840. Interestingly, the establishment of the nation's basic financial structure predated by three decades the canals, railroads, and widespread use of water and steam-powered machinery that are thought to have triggered modernization. We argue that this innovative and expanding financial system, by providing debt and equity financing to businesses and governments as new technologies emerged, was central to the nation's early growth and modernization. The analysis includes a set of multivariate time series models that relate measures of banking and equity market activity to measures of investment, imports and business incorporations from 1790 to 1850. The findings offer support for our hypothesis of "finance-led" growth in the U.S. case. By implication, the interest today in improving financial systems as a means of fostering sustainable growth is not misplaced.

Keywords: Financial markets; securities markets; growth; early national period; VAR (search for similar items in EconPapers)
JEL-codes: E44 G10 N11 N21 (search for similar items in EconPapers)
Date: 2000-05
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http://www.accessecon.com/pubs/VUECON/vu00-w15.pdf First version, 2000 (application/pdf)

Related works:
Journal Article: Emerging financial markets and early US growth (2005)
Working Paper: Emerging Financial Markets and Early U.S. Growth (2000)
Working Paper: Emerging Financial Markets and Early U.S. Growth (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0015

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