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Credit Rationing and Crowding Out During the Industrial Revolution: Evidence from Hoare's Bank, 1702-1862

33 Pages Posted: 6 Feb 2004  

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

Peter Temin

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2004

Abstract

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

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

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Peter Temin (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-280a
Cambridge, MA 02142
United States
617-253-3126 (Phone)
617-253-6915 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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