IDEAS home Printed from
   My bibliography  Save this article

Financial development and sectoral output growth in nineteenth-century Germany


  • Diekmann, Katharina
  • Westermann, Frank


In this article we re-evaluate the hypothesis that the development of the financial sector was an essential factor behind economic growth in nineteenth-century Germany. We apply a structural VAR framework to a new annual data set from 1870 to 1912 that was initially compiled by Walther Hoffmann (1965). With respect to the literature, the distinguishing characteristic of our analysis is the focus on different sectors in the economy and the interpretation of the findings in the context of a two-sector growth model. We find that all sectors were affected significantly by shocks from the banking system. Interestingly, this link is the strongest in sectors with small or non-tradable-goods-producing firms, such as construction, services, transportation and agriculture. In this regard, the growth patterns in nineteenth-century Germany are similar to those in today's emerging markets.

Suggested Citation

  • Diekmann, Katharina & Westermann, Frank, 2012. "Financial development and sectoral output growth in nineteenth-century Germany," Financial History Review, Cambridge University Press, vol. 19(02), pages 149-174, August.
  • Handle: RePEc:cup:fihrev:v:19:y:2012:i:02:p:149-174_00

    Download full text from publisher

    File URL:
    File Function: link to article abstract page
    Download Restriction: no

    References listed on IDEAS

    1. Uebele, Martin & Ritschl, Albrecht, 2009. "Stock markets and business cycle comovement in Germany before World War I: Evidence from spectral analysis," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 35-57, March.
    2. William Allen & Richhild Moessner, 2010. "Central bank co-operation and international liquidity in the financial crisis of 2008-9," BIS Working Papers 310, Bank for International Settlements.
    3. Domanski, Dietrich & Turner, Philip, 2011. "The Great Liquidity Freeze: What Does It Mean for International Banking?," ADBI Working Papers 291, Asian Development Bank Institute.
    4. Allen, William A. & Wood, Geoffrey, 2006. "Defining and achieving financial stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 152-172, June.
    5. Pozsar, Zoltan & Adrian, Tobias & Ashcraft, Adam B. & Boesky, Hayley, 2013. "Shadow banking," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-16.
      • Zoltan Pozsar & Tobias Adrian & Adam B. Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
    6. Moessner, Richhild & Allen, William A., 2011. "Banking crises and the international monetary system in the Great Depression and now," Financial History Review, Cambridge University Press, vol. 18(01), pages 1-20, April.
    7. Miguel Almunia & Agustín Bénétrix & Barry Eichengreen & Kevin H. O'Rourke & Gisela Rua, 2010. "From Great Depression to Great Credit Crisis: similarities, differences and lessons," Economic Policy, CEPR;CES;MSH, vol. 25, pages 219-265, April.
    8. Jukka Pihlman & Han van der Hoorn, 2010. "Procyclicality in Central Bank Reserve Management; Evidence from the Crisis," IMF Working Papers 10/150, International Monetary Fund.
    9. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    10. Adam Copeland & Antoine Martin & Michael Walker, 2010. "The tri-party repo market before the 2010 reforms," Staff Reports 477, Federal Reserve Bank of New York.
    11. Accominotti, Olivier, 2012. "London Merchant Banks, the Central European Panic, and the Sterling Crisis of 1931," The Journal of Economic History, Cambridge University Press, vol. 72(01), pages 1-43, March.
    12. Aiyar, Shekhar, 2011. "How did the crisis in international funding markets affect bank lending? Balance sheet evidence from the United Kingdom," Bank of England working papers 424, Bank of England.
    13. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
    14. Robert N McCauley & Jean-François Rigaudy, 2011. "Managing foreign exchange reserves in the crisis and after," BIS Papers chapters,in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 19-47 Bank for International Settlements.
    15. Harold James, 1992. "Financial flows across frontiers during the interwar depression," Economic History Review, Economic History Society, vol. 45(3), pages 594-613, August.
    16. Ben Bemanke & Harold James, 1991. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Chapters,in: Financial Markets and Financial Crises, pages 33-68 National Bureau of Economic Research, Inc.
    17. Naohiko Baba & Robert N McCauley & Srichander Ramaswamy, 2009. "US dollar money market funds and non-US banks," BIS Quarterly Review, Bank for International Settlements, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Emmanuel Carré & Guillaume L’Œillet, 2017. "Une revue de la littérature récente sur le nexus finance-croissance après la crise : apports, limites et pistes de recherche," Revue d'économie financière, Association d'économie financière, vol. 0(3), pages 271-290.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:fihrev:v:19:y:2012:i:02:p:149-174_00. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.