Working Paper: CEPR ID: DP17766
Authors: Nuno Palma; Carolyn Sissoko
Abstract: We present a financial history of the Seven Years’ War (1756–1763) using a new dataset derived from the Bank of England minutes. We argue that the war and the associated actions of the Bank of England led to a transformation of the financial system. Additionally, while there was short-term crowding out of private investment when interest rates rose due to the issue of war-related government debt, in the long-run there was crowding in: government spending led to an increase in private sector investment.
Keywords: Bank of England; City of London; Discount Market; Interest Rates; Crowding In; Financial History
JEL Codes: N13; N23; N43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher government spending (H59) | Lower private interest rates (E43) |
| Lower private interest rates (E43) | Increase in private sector investment (E22) |
| Higher government spending (H59) | Increase in private sector investment (E22) |
| Bank of England's actions (E58) | Prevent decline in private investment (E22) |
| Government military expenditure (H56) | Increase in private sector investment (E22) |