Emerging Financial Markets and Early U.S. Growth

56 Pages Posted: 5 Nov 1999 Last revised: 24 Oct 2014

See all articles by Peter L. Rousseau

Peter L. Rousseau

Vanderbilt University - Department of Economics

Richard Sylla

New York University - Stern School of Business, Department of Economics

Date Written: December 1999

Abstract

Studies of early U.S. growth traditionally have emphasized real-sector explanations for an acceleration that by many accounts became detectable between 1815 and 1840. Interestingly, the establishment of the nation's basic financial structure predated by three decades the canals, railroads, and widespread use of water and steam-powered machinery that are thought to have triggered modernization. We argue that this innovative and expanding financial system, by providing debt and equity financing to businesses and governments as new technologies emerged, was central to the nation's early growth and modernization. The analysis includes a set of multivariate time series models that relate measures of banking and equity market activity to measures of investment, imports and business incorporations from 1790 to 1850. The findings offer support for our hypothesis of finance-led' growth in the U.S. case. By implication, the interest today in improving financial systems as a means of fostering sustainable growth is not misplaced.

Suggested Citation

Rousseau, Peter L. and Sylla, Richard, Emerging Financial Markets and Early U.S. Growth (December 1999). NBER Working Paper No. w7448. Available at SSRN: https://ssrn.com/abstract=191548

Peter L. Rousseau (Contact Author)

Vanderbilt University - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States
615-343-2466 (Phone)
615-343-8495 (Fax)

HOME PAGE: http://www.vanderbilt.edu/econ/faculty/rousseau.html

Richard Sylla

New York University - Stern School of Business, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0869 (Phone)

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