Institute of New Structural Economics
NBER Working Papers and Publications
|March 2018||Capital Markets and Grain Prices: Assessing the Storage Approach|
with Wolfgang Keller, Carol H. Shiue: w24388
This paper evaluates an approach popularized by McCloskey and Nash (1984) that exploits the fact that grain prices provide information on interest rates. While the grain price approach enables a comparative analysis of capital market development across pre-modern economies and has been applied in various contexts, to date this is the first paper to show how well it captures the actual market development as based on financial data. Using matched data on bank interest rates and grain prices for early 19th century U.S. regions, we show that the grain price approach is useful for capturing differences in capital market development across regions. While estimating particular region-time specific interest rates can be challenging, using both cross-sectional and time-series information the grain ...
|July 2015||Capital Markets in China and Britain, 18th and 19th Century: Evidence from Grain Prices|
with Wolfgang Keller, Carol H. Shiue: w21349
Does the difference in capital market development between major advanced economies during the 18th and 19th centuries explain the subsequent divergence in their income levels? We employ a storage model to obtain regional interest rates from monthly grain price changes, and we compare the integration of capital markets in Britain and China. The first step is to validate the approach by showing that grain price-based interest rates match salient features of the 19th century U.S. capital market. Our analysis using almost 20,000 new interest rates reveals that Britain’s rates were lower than China’s, even compared to China’s more developed areas, although not by a large margin. The regional integration of capital markets in Britain was substantially higher than in China, however, indicating lo...