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Credit Rationing and Crowding out during the Industrial Revolution: Evidence from Hoare's Bank, 1702-1862

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  • Peter Temin
  • Hans-Joachim Voth

Abstract

Crowding-out during the British Industrial Revolution has long been one of the leading explanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the eighteenth- and early nineteenth-century private loan market balanced through quantity rationing. Using a unique set of observations on lending volume at a London goldsmith bank, Hoare's, we document the impact of wartime financing on private credit markets. We conclude that there is considerable evidence that government borrowing, especially during wartime, crowded out private credit.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 211.

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Date of creation: Feb 2004
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Handle: RePEc:bge:wpaper:211

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  1. repec:cup:jechis:v:44:y:1984:i:03:p:687-712_03 is not listed on IDEAS
  2. Peter Temin & Hans-Joachim Voth, 2004. "Riding the South Sea Bubble," American Economic Review, American Economic Association, American Economic Association, vol. 94(5), pages 1654-1668, December.
  3. Peter Temin & Hans-Joachim Voth, 2003. "Banking as an Emerging Technology: Hoares Bank 1702-1742," Working Papers 93, Barcelona Graduate School of Economics.
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Cited by:
  1. Joachim Voth & Mauricio Drelichman, 2008. "Debt sustainability in historical perspective: The role of fiscal repression," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1184, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Maria Alejandra Irigoin & Regina Grafe, 2012. "Bounded Leviathan: or why North and Weingast are only right on the right half," Economic History Working Papers, London School of Economics and Political Science, Department of Economic History 44492, London School of Economics and Political Science, Department of Economic History.
  3. Kiril Danailov Kossev, 2008. "The Banking Sector and the Great Depression in Bulgaria, 1924 - 1938: Interlocking and Financial Sector Profitability," Working Papers, Bank of Greece 76, Bank of Greece.
  4. David R Stead, . "Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture," Discussion Papers, Department of Economics, University of York 05/01, Department of Economics, University of York.
  5. Efraim Benmelech & Tobias J. Moskowitz, 2010. "The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century," Journal of Finance, American Finance Association, American Finance Association, vol. 65(3), pages 1029-1073, 06.

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