Capital Markets in China and Britain, 1770–1860: Evidence from Grain Prices
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Abstract
Based on comprehensive grain price data, we employ a storage model to estimate consistent interest rates and compare capital market development between Britain and China. Interest rates for Britain were lower than China's on average by about 3 percentage points from 1770 to 1860. For country pairs with bilateral distance less than 200 kilometers, the regional capital market integration in the Yangzi Delta in China comes close to the British average; but at larger distances, spatial interest rate correlations in Britain are twice those of the Delta and three or more times as high as elsewhere in China. Overall, our results suggest capital market development differences at an early date, so that capital market performance may be important for the Great Divergence that emerged between China and Western countries at this time.Citation
Keller, Wolfgang, Carol H. Shiue, and Xin Wang. 2021. "Capital Markets in China and Britain, 1770–1860: Evidence from Grain Prices." American Economic Journal: Applied Economics, 13 (3): 31-64. DOI: 10.1257/app.20180299Additional Materials
JEL Classification
- E43 Interest Rates: Determination, Term Structure, and Effects
- E44 Financial Markets and the Macroeconomy
- N23 Economic History: Financial Markets and Institutions: Europe: Pre-1913
- N25 Economic History: Financial Markets and Institutions: Asia including Middle East
- N53 Economic History: Agriculture, Natural Resources, Environment, and Extractive Industries: Europe: Pre-1913
- N55 Economic History: Agriculture, Natural Resources, Environment, and Extractive Industries: Asia including Middle East
- Q11 Agriculture: Aggregate Supply and Demand Analysis; Prices
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