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Assessing the Impact of World War I on the City of London

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Author Info
Sarah Cochrane
Abstract

The interwar years saw the rise of New York to challenge London as the world’s leading provider of financial services. This paper will show that the current explanations fail to identify a key factor in New York’s rise. The City was prevented from operating a full capacity by a capital issues embargo, imposed by the Bank of England to support the pound. As a result, New York was able to enter the sector with little competition from London, and expand rapidly to issue over half of the global capital exported abroad in the 1920s. Without the embargo, this would not have been possible, as the London merchant banks were the most productive producers in the industry, a position built up over the previous half century. This result challenges the consensus that the return to gold was good for the City. The merchant banks suffered and lost business, suggesting that this policy was even more disastrous than is currently thought.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 456.

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Date of creation: 2009
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Handle: RePEc:oxf:wpaper:456

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Related research
Keywords: Financial services; City of London; WWI; CGE simulations;

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Find related papers by JEL classification:
N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  2. Alan M. Taylor, 2003. "Foreign Capital in Latin America in the Nineteenth and Twentieth Centuries," NBER Working Papers 9580, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  4. Crafts, Nicholas, 1998. "Forging Ahead and Falling Behind: The Rise and Relative Decline of the First Industrial Nation," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 193-210, Spring. [Downloadable!] (restricted)
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This page was last updated on 2009-12-4.

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