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Capital Markets in China and Britain, 1770–1860: Evidence from Grain Prices

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  • Wolfgang Keller
  • Carol H. Shiue
  • Xin Wang
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.

Suggested Citation

  • Wolfgang Keller & Carol H. Shiue & Xin Wang, 2021. "Capital Markets in China and Britain, 1770–1860: Evidence from Grain Prices," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 31-64, July.
    • Handle: RePEc:aea:aejapp:v:13:y:2021:i:3:p:31-64
    DOI: 10.1257/app.20180299
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - 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 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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