Financial Systems, Economic Growth, and Globalization

53 Pages Posted: 15 Jun 2001 Last revised: 19 Mar 2002

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: June 2001

Abstract

This paper brings together two strands of the economic literature -- that on the finance-growth nexus and that on capital market integration -- and explores key issues surrounding each strand through both institutional/country histories and formal quantitative analysis. We begin with studies of the Dutch Republic, England, the U.S., France, Germany and Japan that span three centuries, detailing how in each case the emergence of a financial system jump-started economic growth. Using a cross-country panel of seventeen countries covering the 1850-1997 period, we then uncover a robust correlation between financial factors and economic growth that is consistent with a leading role for finance, and show that these effects were strongest over the 80 years preceding the Great Depression. Next, we show that countries with more sophisticated financial systems engage in more trade and appear to be better integrated with other economies by identifying roles for both finance and trade in the convergence of interest rates that occurred among the Atlantic economies prior to 1914. Our results suggest that the growth and increasing globalization of these economies might indeed have been 'finance-led.'

Suggested Citation

Rousseau, Peter L. and Sylla, Richard, Financial Systems, Economic Growth, and Globalization (June 2001). NBER Working Paper No. w8323. Available at SSRN: https://ssrn.com/abstract=273691

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)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
143
Abstract Views
3,506
rank
213,470
PlumX Metrics