Working Paper: NBER ID: w5743
Authors: Alan M. Taylor
Abstract: Economic historians have been concerned with the evolution of international capital markets over the long run, but empirical testing of market integration has been limited. This paper augments the literature by investigating long- and short-run criteria for capital mobility using time-series and cross-section analysis of saving-investment correlation for twelve countries since 1850. The results present a nuanced picture of capital market evolution. The sample shows considerable cross-country heterogeneity. Broadly speaking, the inter-war period, and especially the Great Depression, emerge as an era of diminishing capital mobility, and only recently can we observe a tentative return to the degree of capital mobility witnessed during the late nineteenth century.
Keywords: international capital mobility; saving-investment relationship; historical analysis
JEL Codes: F21; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital mobility during the late nineteenth century (F20) | capital mobility during the interwar period (F20) |
| capital mobility (F20) | capital mobility after a long period of decline (F20) |
| domestic saving (D14) | domestic investment (E22) |
| government policy changes (O24) | capital mobility (F20) |
| market structure variations (L11) | capital mobility (F20) |
| high saving-investment correlation (E21) | imperfect capital mobility (F32) |