Hostname: page-component-cd9895bd7-dk4vv Total loading time: 0 Render date: 2024-12-25T18:38:56.897Z Has data issue: false hasContentIssue false
  • English
  • Français

Institutional Reforms, Financial Development and Sovereign Debt: Britain 1690–1790

Published online by Cambridge University Press:  28 November 2006

Nathan Sussman  and
Yishay Yafeh
Nathan Sussman
Affiliation:
Associate Professor, Department of Economics, The Hebrew University, Mount Scopus, Jerusalem 91905, Israel; and Research Fellow, CEPR. E-mail: msussman @mscc.huji.ac.il.
Yishay Yafeh
Affiliation:
Senior Lecturer, School of Business Administration, The Hebrew University, Mount Scopus, Jerusalem 91905, Israel; Research Fellow, CEPR; and Research Fellow, ECGI. E-mail: msyafeh@mscc.huji.ac.il.
Get access Rights & Permissions [Opens in a new window]

Abstract

We revisit the evidence on the relations between institutions, the cost of government debt, and financial development in Britain (1690–1790) and find that interest rates remained high and volatile for four decades after the Glorious Revolution, partly due to wars and instability; British interest rates co-moved with those in Holland; Debt per capita remained lower in Britain than in Holland until around 1780; and Britain did not borrow at lower rates than European countries with more limited protection of property rights. We conclude that, in the short run, institutional reforms are not rewarded by financial markets.

Type
ARTICLES
Information
The Journal of Economic History , Volume 66 , Issue 4 , December 2006 , pp. 906 - 935
Copyright
© 2006 The Economic History Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu Daron, Simon Johnson, and James Robinson. (2005): “The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth.” American Economic Review 95, no. 3 546–79.Google Scholar
Allen Robert. (2001): “The Great Divergence in European Wages and Prices from the Middle Ages to the First World War.” Explorations in Economic History 38, no. 4 411–47.Google Scholar
Allen Robert. (2003): “Progress and Poverty in Early Modern Europe.” Economic History Review 56, no. 3 403–43.Google Scholar
Barro Robert. (1987): “Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701–1918.” Journal of Monetary Economics 20, no. 2 221–48.Google Scholar
Brewer John. 1990. The Sinews of Power: War, Money, and the English State, 1688–1783. Cambridge, MA: Harvard University Press.
British Parliamentary Papers. 1890–1891. Reports on the Proceedings of the Commissioners of the National Debt from 1786 to 1790, Vol. 48
British Parliamentary Papers. 1898. History of the Funded Debt from 1694 to 1786, Vol. 52
Broz Lawrence, and Richard Grossman. (2004): “Paying for Privilege: The Political Economy of Bank of England Charters: 1694–1844.” Explorations in Economics History 41, no. 1 48–72.Google Scholar
Buchinsky Moshe, and Ben Polak. (1993): “The Emergence of a National Capital Market in Britain, 1710–1880.” This Journal 53, no. 3 1–24.Google Scholar
Carlos Ann, Larry Neal, and Kirsten Wandschneider. 2005. “The Origins of National Debt: The Financing and Re-financing of the War of the Spanish Succession.” Unpublished Manuscript, University of Illinois
Castaing John. 1694–1721. The Course of the Exchange
Clark Gregory. (1996): “The Political Foundations of Modern Economic Growth: Britain, 1540–1800.” Journal of Interdisciplinary History 26, no. 4 563–88.Google Scholar
Clark Gregory. (2001): “Debt, Deficits and Crowding Out: England, 1727–1840.” European Review of Economic History 5, no. 3 403–36.Google Scholar
Clark Gregory. (2006): “The Conditions of the Working Class in England, 1209–2004.” Journal of Political Economy 113, no. 6 1307–40.Google Scholar
Crafts Nicholas. 1994. “The Industrial Revolution.” In The Economic History of Britain since 1700, Second Edition, Volume 1, edited by Roderick Floud and Donald McCloskey, 1–16. Cambridge: Cambridge University Press.
Dickson P. G. M. 1967. The Financial Revolution in England. London: Macmillan Press.
Dickson P. G. M.. 1987. Finance and Government under Maria Theresa, 1740–1780. Oxford: Oxford University Press.
Epstein Stephan. 2000. Freedom and Growth: The Rise of States and Markets in Europe, 1300–1750. London: Routledge.
European State Finance Database, www.le.ac.uk/hi/bon/ESFDB/.
Ferguson Niall. 2001. The Cash Nexus: Money and Power in the Modern World, 1700–2000. London: Penguin Press.
Kroner Martin. 1995. “Public Debt.” In Economic Systems and State Finance, edited by Richard Bonney, 507–38. Oxford: Oxford University Press.
La Porta Rafael, Florencio Lopez de Silanes, Andrei Shleifer, and Robert Vishny. (1997): “Legal Determinants of External Finance.” Journal of Finance 52, no. 3 1131–50.Google Scholar
La Porta Rafael, Florencio Lopez de Silanes, Andrei Shleifer, and Robert Vishny. (1998): “Law and Finance.” Journal of Political Economy 106, no. 6 1113–55.Google Scholar
Levine Ross, and Sara Zervos. (1998): “Stock Markets, Banks, and Economic Growth.” American Economic Review 88, no. 3 537–58.Google Scholar
Mauro Paolo, Nathan Sussman, and Yishay Yafeh. (2002): “Emerging Market Spreads: Then versus Now.” Quarterly Journal of Economics 117, no. 2 695–733.Google Scholar
Mauro Paolo, Nathan Sussman, and Yishay Yafeh. 2006. Emerging Markets and Financial Globalization: Sovereign Bond Spreads in 1870–1913 and Today. Oxford: Oxford University Press.
McCulloch John Ramsey. 1837. Dictionary, Practical, Theoretical and Historical, of Commerce and Commercial Navigation. London: Longman Press.
Mitchell Brian. 1988. British Historical Statistics. Cambridge: Cambridge University Press.
Neal Larry. 1990 The Rise of Financial Capitalism, International Capital Markets in the Age of Reason. Cambridge: Cambridge University Press.
North Douglass, and Barry Weingast. (1989): “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century Britain.” This Journal 49, no. 4 803–32.Google Scholar
O’Brien Patrick. 2002. “Fiscal Exceptionalism: Great Britain and its European Rivals–-From Civil War to Triumph at Trafalgar and Waterloo.” In The Political Economy of British Historical Experience, 1688–1914, edited by Patrick O’Brien and Donald Winch, 245–65. Oxford: Oxford University Press.
Oppers Stefan. (1993): “The Interest Rate Effect of Dutch Money in Eighteenth-Century Britain.” This Journal 53, no. 3 25–43.Google Scholar
Quinn Stephen. (2001): “The Glorious Revolution’s Effect on British Private Finance: A Microhistory, 1680–1705.” This Journal 61, no. 3 593–615.Google Scholar
Riley James. 1980. International Government Finance and the Amsterdam Capital Market 1740–1815. Cambridge: Cambridge University Press.
Riley James. 1986. The Seven Years War and the Old Regime in France. Princeton, NJ: Princeton University Press.
Roseveare Henry. 1991. The Financial Revolution 1660–1760. London, Longman Press.
Sinclair John. 1803. The History of the Public Revenue of the British Empire, Vol. 2. London: A. Strahan.
Stasavage David. (2002): “Credible Commitment in Early Modern Europe: North and Weingast Revisited.” Journal of Law, Economics and Organization 18, no. 1 155–86.Google Scholar
Stasavage David. 2003. Public Debt and the Birth of the Democratic State. Cambridge: Cambridge University Press.
Stasavage David. 2005. “Partisan Politics and Public Debt: The Importance of the Whig Supremacy for Britain’s Financial Revolution.” Unpublished Manuscript, London School of Economics
Stone Irving. 1999. The Global Export of Capital from Great Britain, 1865–1914: A Statistical Survey. New York: St. Martin’s Press.
Summerhill William. 2005. “Political Economics of the Domestic Debt in Nineteenth Century Brazil.” Unpublished Manuscript, University of California, Los Angeles
Summerhill William. 2005. “Inglorious Revolution: Sovereign Debt, Tropical Credibility, and Financial Underdevelopment in Imperial Brazil.” Unpublished Manuscript, University of California, Los Angeles
Sussman Nathan, and Yishay Yafeh. (2000): “Institutions, Reforms, and Country Risk: Lessons from Japanese Government Debt in the Meiji Period.” This Journal 60, no. 2 442–67.Google Scholar
Sylla Richard. (2002): “Financial Systems and Economic Modernization.” This Journal 62, no. 2 277–92.Google Scholar
Temin Peter, and Hans-Joachim Voth. “Private Borrowing during the Financial Revolution: Hoare’s Bank, 1702–1742 and its Customers.” forthcoming, Economic History Review.
Velde Francois, and David Weir. (1992): “The Financial Market and Government Debt Policy in France, 1746–1793.” This Journal 52, no. 1 1–39.Google Scholar
de Vries Jan, and Ad van der Woude. 1996. The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500–1815. Cambridge: Cambridge University Press.
Wells John, and Douglas Wills. (2000): “Revolution, Restoration, and Debt Repudiation: The Jacobite Threat to Britain’s Institutions and Economic Growth.” This Journal 60, no. 2 418–41.Google Scholar
Wilson Charles. 1966. Anglo-Dutch Commerce and Finance in the Eighteenth Century. Cambridge: Cambridge University Press.
Wright J. F. (1999): “British Government Borrowing in Wartime, 1750–1815.” Economic History Review 52, no. 2 355–61.Google Scholar