33 Pages Posted: 6 Feb 2004
Date Written: February 1, 2004
Crowding-out during the British Industrial Revolution has long been one of the leading explanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the eighteenth- and early nineteenth-century private loan market balanced through quantity rationing. Using a unique set of observations on lending volume at a London goldsmith bank, Hoare's, we document the impact of wartime financing on private credit markets. We conclude that there is considerable evidence that government borrowing, especially during wartime, crowded out private credit.
Keywords: credit rationing, Napoleonic wars, Industrial Revolution, technological change, crowding out
JEL Classification: E22, E43, E51, E65, N23, N13
Suggested Citation: Suggested Citation
Voth, Hans-Joachim and Temin, Peter, Credit Rationing and Crowding Out During the Industrial Revolution: Evidence from Hoare's Bank, 1702-1862 (February 1, 2004). MIT Economics Working Paper No. 04-05. Available at SSRN: https://ssrn.com/abstract=499308 or http://dx.doi.org/10.2139/ssrn.499308