Working Paper: CEPR ID: DP10702
Authors: Wolfgang Keller; Carol H. Shiue; Xin Wang
Abstract: Based on the most comprehensive grain prices available, we employ an asset-- pricing model to estimate consistent interest rates and compare capital market development in Britain and China. Estimated interest rates for Britain were at least 28% lower than for China from 1770 to 1860. Regional capital market integration in the Yangzi Delta comes close to the British Average at distances below 200 kilometers, but at larger distances 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 divergence at an early date.
Keywords: Market Integration; Storage; Finance; Comparative Development
JEL Codes: G10; N10; N13; N15; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lower interest rates in Britain (E43) | More developed capital market (G19) |
| Higher integration of capital markets in Britain (F36) | More efficient capital allocation (D61) |
| Lower integration of capital markets in China (G19) | Hindered ability to allocate capital effectively (G31) |
| Capital market performance (G10) | Economic divergence between Britain and China (N15) |
| Higher regional interest rate correlation in Britain (E49) | More efficient capital flows (F32) |