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The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880 1913

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  • FERGUSON, NIALL
  • SCHULARICK, MORITZ

Abstract

This article reassesses the importance of colonial status to investors before 1914 by means of multivariable regression analysis of the data available to contemporaries. We show that British colonies were able to borrow in London at significantly lower rates of interest than noncolonies precisely because of their colonial status, which mattered more than either gold standard adherence or the sustainability of fiscal policies. The empire effect was, on average, a discount of around 100 basis points, rising to around 175 basis points for the underdeveloped African and Asian colonies. Colonial status significantly reduced the default risk perceived by investors.

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Bibliographic Info

Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 66 (2006)
Issue (Month): 02 (June)
Pages: 283-312

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Handle: RePEc:cup:jechis:v:66:y:2006:i:02:p:283-312_00

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