NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Emerging Financial Markets and Early U.S. Growth

Peter L. Rousseau, Richard Sylla

NBER Working Paper No. 7448
Issued in December 1999
NBER Program(s):   DAE   EFG   ME

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.

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Document Object Identifier (DOI): 10.3386/w7448

Published: Rousseau, Peter L. and Richard Sylla. "Emerging Financial Markets And Early US Growth," Explorations in Economic History, 2005, v42(1,Jan), 1-26. citation courtesy of

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