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Foreign Capital in 19th Century Spain's Investment Boom

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  • Prados de la Escosura, Leandro

Abstract

Spain experienced an investment boom over 1850-1874. Historians attributed a significant role to foreign capital inflow. Sudrià (2018) challenged the consensus on the basis of Moro, Nuño, and Tedde (2015) capital balance account estimates that imply a much lower capital inflow. Dishoarding of bullion and previous savings would have catered for an increasing investment demand providing the means to meet the current account deficit without causing deflation. It is argued here that the empirical basis for Sudrià's claim is flawed. Moro et al. (2015) direct appraisal of the capital balance account resulted in an underestimate of the net capital inflow and a substantial upward bias of the change in reserves. The current account deficit resulted from an inflow of capital that allowed investment to raise facilitating imports of capital goods and raw materials. Foreign capital made a significant contribution to the investment boom of 19th century and boosted Spanish performance.

Suggested Citation

  • Prados de la Escosura, Leandro, 2018. "Foreign Capital in 19th Century Spain's Investment Boom," IFCS - Working Papers in Economic History.WH 26196, Universidad Carlos III de Madrid. Instituto Figuerola.
    • Handle: RePEc:cte:whrepe:26196
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    References listed on IDEAS

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    1. Elise S. Brezis, 1995. "Foreign capital flows in the century of Britain's industrial revolution: new estimates, controlled conjectures," Economic History Review, Economic History Society, vol. 48(1), pages 46-67, February.
    2. Alessio Moro & Galo Nuño & Pedro Tedde, 2015. "A twin crisis with multiple banks of issue. Spain in the 1860s," European Review of Economic History, European Historical Economics Society, vol. 19(2), pages 171-194.
    3. Penelope Hartland, 1960. "Canadian Balance of Payments since 1868," NBER Chapters, in: Trends in the American Economy in the Nineteenth Century, pages 717-756, National Bureau of Economic Research, Inc.
    4. Douglass North, 1960. "The United States Balance of Payments, 1790-1860," NBER Chapters, in: Trends in the American Economy in the Nineteenth Century, pages 573-628, National Bureau of Economic Research, Inc.
    5. The Conference on Research in Income and Wealth, 1960. "Trends in the American Economy in the Nineteenth Century," NBER Books, National Bureau of Economic Research, Inc, number unkn60-1, May.
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    More about this item

    Keywords

    Spain;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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