Institutional Reforms, Financial Development and Sovereign Debt: Britain 1690–1790

2006 ◽  
Vol 66 (4) ◽  
pp. 906-935 ◽  
Author(s):  
Nathan Sussman ◽  
Yishay Yafeh
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Financial Development ◽  
Sovereign Debt ◽  
Glorious Revolution ◽  
Institutional Reforms ◽  
Short Run ◽  
Per Capita ◽  
The Glorious Revolution ◽  
The Cost

We revisit the evidence on the relations between institutions, the cost of government debt, and financial development in Britain (1690–1790) and find that interest rates remained high and volatile for four decades after the Glorious Revolution, partly due to wars and instability; British interest rates co-moved with those in Holland; Debt per capita remained lower in Britain than in Holland until around 1780; and Britain did not borrow at lower rates than European countries with more limited protection of property rights. We conclude that, in the short run, institutional reforms are not rewarded by financial markets.

Was the Glorious Revolution a Constitutional Watershed?

2012 ◽  
Vol 72 (3) ◽  
pp. 567-600 ◽  
Author(s):  
GARY W. COX
Keyword(s):  
Property Rights ◽  
Interest Rates ◽  
Sovereign Debt ◽  
Glorious Revolution ◽  
Public Finances ◽  
Constitutional Reforms ◽  
The Glorious Revolution ◽  
Douglass North ◽  
The Revolution

Douglass North and Barry Weingast's seminal account of the Glorious Revolution argued that specific constitutional reforms enhanced the credibility of the English Crown, leading to much stronger public finances. Critics have argued that the most important reforms occurred incrementally before the Revolution; and that neither interest rates on sovereign debt nor enforcement of property rights improved sharply after the Revolution. In this article, I identify a different set of constitutional reforms, explain why precedents for these reforms did not lessen their revolutionary impact, and show that the evidence, properly evaluated, supports a view of the Revolution as a watershed.

scholarly journals Employment preservation and textile regulation in early modern England, 1550–1640

2021 ◽  
pp. 1-15
Author(s):  
John H. Gendron
Keyword(s):  
Early Modern ◽  
Recent Literature ◽  
Institutional Structure ◽  
Regulatory Change ◽  
Barriers To Entry ◽  
Glorious Revolution ◽  
Structure Changes ◽  
Local Officials ◽  
The Glorious Revolution ◽  
The Cost

Abstract Much agreement exists among economic historians that an institutional structure which allows for broad participation in a country's economy is conducive to growth. With respect to England's institutional structure, changes that followed the Glorious Revolution of 1688 are given pride of place in recent literature. This article contributes to this literature by highlighting and explaining regulatory change that removed barriers to entry into the country's most vital industry, textiles, in the years between 1550 and 1640. However, although economic historians have tended to explain England's growth-facilitating institutions as arising abruptly through political revolution that placed constraints on the Crown, this article will elucidate change that was protracted, accretive, peaceful, and came through royal institutions. More specifically, this article argues that restrictive regulations, which were widely supported, were removed because Crown and Council, in consultation with local officials, recognized that enforcement would come at the cost of the greater priority of employment preservation.

Effects of Fiscal Policy on Credit Markets

2020 ◽  
Vol 110 ◽  
pp. 119-124 ◽  
Author(s):  
Alan J. Auerbach ◽  
Yuriy Gorodnichenko ◽  
Daniel Murphy
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Credit Markets ◽  
Local Economy ◽  
Government Contracts ◽  
Fiscal Stimulus ◽  
Access To Credit ◽  
Consumer Loans ◽  
Us Federal Government ◽  
The Cost

Credit markets typically freeze in recessions: access to credit declines, and the cost of credit increases. A conventional policy response is to rely on monetary tools to saturate financial markets with liquidity. Given limited space for monetary policy in the current economic conditions, we study how fiscal stimulus can influence local credit markets. Using rich geographical variation in US federal government contracts, we document that, in a local economy, interest rates on consumer loans decrease in response to an expansionary government spending shock.

scholarly journals ANALYSIS OF THE HOUSING MARKET IN LITHUANIA

2008 ◽  
Vol 12 (4) ◽  
pp. 271-280 ◽  
Author(s):  
Feliksas Ivanauskas ◽  
Rimantas Eidukevičius ◽  
Albinas Marčinskas ◽  
Birutė Galinienė
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Housing Market ◽  
Supply And Demand ◽  
Economic Factors ◽  
Causality Tests ◽  
The One ◽  
The Cost ◽  
The Given ◽  
The Relationship

Cointegration and Granger causality tests were used for the statistical analyses of the housing market in Lithuania. The relationship between the cost of housing and afford‐ability on the one hand, and interest rates, GDP and average incomes on the other was not proven to exist using the given statistical methods. The period of increase in the cost of housing in Lithuania over the last five years is exceptional and difficult to explain using fundamental economic factors and their fluctuation trends alone. The cost of housing has made a clear departure from the economic (business) cycle; the economy has grown, however at a much slower rate than rising costs in the housing market. The reasons for this situation are record lows in interest rates, good conditions to gain financing, the liberalisation of financial markets, speculative attitudes in expectation of the introduction of the Euro, and a divide between the supply and demand of housing that is available. It should be noted that the evaluation of the influence of these factors on fluctuations in costs in the housing market is more hypothetical in nature. Santrauka Nekilnojamojo turto rinkos Lietuvoje statistinei analizei buvo naudojami kointegravimo ir Grangerio priežastingumo testai. Taikant esamus statistinius metodus nebuvo įrodyta, kad egzistavo ryšys tarp nekilnojamojo turto kainos ir įperkamumo, viena vertus, ir palūkanų normų, BVP bei vidutinių pajamų, kita vertus. Nekilnojamojo turto kainos Lietuvoje didėjimo per pastaruosius penketą metų laikotarpis yra išskirtinis ir sunkiai paaiškinamas remiantis vien pagrindiniais ekonominiais veiksniais ir jų svyravimų tendencijomis. Nekilnojamojo turto kaina aiškiai nukrypo nuo ekonomikos (verslo) ciklo; ekonomika išaugo, tačiau gerokai lėtesniu tempu nei augančios kainos nekilnojamojo turto rinkoje. Šios situacijos priežastys – rekordiškai mažos palūkanų normos, geros sąlygos gauti fi nansavimą, fi nansų rinkos liberalizavimas, spekuliaciniai požiūriai tikintis įsivesti eurą ir takoskyra tarp esamo nekilnojamojo turto pasiūlos ir paklausos. Pažymėtina, kad šių veiksnių įtakos kainų svyravimo nekilnojamojo turto rinkoje įvertinimas yra labiau hipotetinis.

War, Moral Hazard, and Ministerial Responsibility: England After the Glorious Revolution

2011 ◽  
Vol 71 (1) ◽  
pp. 133-161 ◽  
Author(s):  
Gary W Cox
Keyword(s):  
Moral Hazard ◽  
Sovereign Debt ◽  
Central Element ◽  
Central Problem ◽  
Glorious Revolution ◽  
Credible Commitment ◽  
Ministerial Responsibility ◽  
The Glorious Revolution ◽  
Douglass North ◽  
The Revolution

I reexamine Douglass North and Barry Weingast's argument regarding credible commitment and sovereign debt in post-revolution England. The central problem that the architects of the revolution settlement had to solve, I argue, was not the king's frequent reneging on financial commitments (a symptom), but the moral hazard that generated the kings' malfeasance (the underlying cause). The central element of the revolution settlement was thus not better holding kings to their commitments, but better holding royal advisors to account for all consequences of the Crown's policies—through what we now call ministerial responsibility.

scholarly journals The Macroeconomics of Microfinance

2020 ◽  
Author(s):  
Francisco J Buera ◽  
Joseph P Kaboski ◽  
Yongseok Shin
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Capital Accumulation ◽  
Small Scale ◽  
Welfare Gains ◽  
Long Run ◽  
Short Run ◽  
Per Capita ◽  
The Rich ◽  
Distributional Impact

Abstract What is the aggregate and distributional impact of microfinance? To answer this question, we develop a quantitative macroeconomic framework of entrepreneurship and financial frictions in which microfinance is modelled as guaranteed small-size loans. We discipline and validate our model using recent empirical evaluations of small-scale microfinance programs. We find that the long-run general equilibrium impact is substantially different from the short-run effect. In the short-run partial equilibrium, output and capital increase with microfinance but total factor productivity (TFP) falls. In the long run, when general equilibrium effects are considered, as should be for economy-wide microfinance interventions, scaling up microfinance has only a small impact on per-capita income, because an increase in TFP is offset by lower capital accumulation. However, the vast majority of the population benefits from microfinance directly and indirectly. The welfare gains are larger for the poor and the marginal entrepreneurs, although higher interest rates in general equilibrium tilt the gains toward the rich.

Fiscal transparency and the cost of sovereign debt

2016 ◽  
Vol 83 (1) ◽  
pp. 106-128 ◽  
Author(s):  
Francisco Bastida ◽  
María-Dolores Guillamón ◽  
Bernardino Benito
Keyword(s):  
Interest Rates ◽  
Public Management ◽  
Sovereign Debt ◽  
Credit Rating ◽  
Credit Ratings ◽  
Political Trust ◽  
Cost Of Debt ◽  
Budget Deficits ◽  
Fiscal Transparency ◽  
The Cost

This article analyses the factors that seem to play an important role in determining the cost of sovereign debt. Specifically, we evaluate to what extent transparency, the level of corruption, citizens’ trust in politicians and credit ratings affect interest rates. For that purpose, we create a transparency index matching the 2007 Organisation for Economic Co-operation and Development/World Bank Budgeting Database items with the Organisation for Economic Co-operation and Development Best Practices for Budget Transparency sections. We also check our assumptions with the International Budget Partnership’s Open Budget Index and with a non-linear transformation of our index. Furthermore, we use several control variables for a sample of 103 countries in the year 2008. Our results show that better fiscal transparency, political trust and credit ratings are connected with a lower cost of sovereign debt. Finally, as expected, higher corruption, budget deficits, current account deficits and unemployment make sovereign interest rates increase. Points for practitioners The key implications for professionals working in public management and administration are twofold. First, despite the criticism raised by credit ratings, it is clear that poorer ratings are connected with higher financing costs for governments. Therefore, governments should enhance those indicators that impact the credit rating of their sovereign debt. Second, governments should seek to be more transparent, since transparency reduces uncertainty about the degree of cheating, improves decision-making and therefore decreases the cost of debt. Transparency reduces information asymmetries between governments and financial markets, which, in turn, diminishes the spread requested by investors.

scholarly journals The nexus between tourism demand and output per capita with the relative importance of trade openness and financial development

2016 ◽  
Vol 23 (1) ◽  
pp. 168-186 ◽  
Author(s):  
Muhammad Shahbaz ◽  
Ronald Ravinesh Kumar ◽  
Stanislav Ivanov ◽  
Nanthakumar Loganathan
Keyword(s):  
Financial Development ◽  
Structural Breaks ◽  
Trade Openness ◽  
Tourism Demand ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
In Series ◽  
Per Capita ◽  
The Impact

This article revisits the tourism-growth nexus in Malaysia using time series quarterly data over the period 1975–2013. The authors examine the impact of tourism using two separate indicators – tourism receipts per capita and visitor arrivals per capita. Using the augmented Solow production function and the autoregressive distributed lag bounds procedure, they also incorporate trade openness and financial development and account for structural breaks in series. The results show the evidence of cointegration between the variables. Assessing the long-run results using both indicators of tourism demand, it is noted that the elasticity coefficient of tourism is 0.13 and 0.10 when considering visitor arrivals and tourism receipts (in per capita terms), respectively. Notably, the impact of tourism demand is marginally higher with visitor arrivals. The elasticity of trade openness is 0.19, that of financial development is 0.09 and that of capital share is 0.15. In the short run, the coefficient of tourism is marginally negative, and for financial development and trade openness, it is 0.01 and 0.18, respectively. The Granger causality tests show bidirectional causation between tourism and output per capita, financial development and tourism and trade openness and tourism demand, duly indicating the feedback or mutually reinforcing impact between the variables and providing evidence that tourism is central to enhancing the key sectors and the overall income level.

scholarly journals Determinants of Household Debt in Botswana: 1994-2012

2015 ◽  
Vol 1 (1) ◽  
pp. 14 ◽  
Author(s):  
Faith M. Zimunya ◽  
Mpho Raboloko
Keyword(s):  
Interest Rates ◽  
Money Supply ◽  
Gdp Per Capita ◽  
Household Debt ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Per Capita ◽  
The Relationship

<p><em>The paper identifies the factors that are influential in determining the growth of household debt in Botswana. Understanding the relationship between household debt and other economic indicators is an important step towards formulating focused and effective policies that control the effects of household debt on the whole economy. Using quarterly data from the first quarter of 1994 to the second quarter of 2012,</em><em> </em><em>the paper employs the Vector Error Correction Model (VECM) to analyse the influence of </em><em>G</em><em>ross </em><em>D</em><em>omestic </em><em>P</em><em>roduct (GDP) per capita, interest rates, inflation, household consumption and money supply on household debt. The findings indicate that GDP per capita, interest rates and money supply determine changes in household debt in the long-run. Further analysis shows that lagged household debt, interest rates and money supply influence changes in household debt in the short-run.</em></p><p><em><br /></em></p>

Foreign direct investment, financial development and economic prosperity in major south Asian economies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Narayan Sethi ◽  
Aurolipsa Das ◽  
Malayaranjan Sahoo ◽  
Saileja Mohanty ◽  
Padmaja Bhujabal
Keyword(s):  
Foreign Direct Investment ◽  
Financial Development ◽  
Free Trade ◽  
South Asian ◽  
Direct Investment ◽  
Gdp Per Capita ◽  
Content Type ◽  
Asian Economies ◽  
Short Run ◽  
Per Capita

PurposeThis paper empirically examines the relationship between foreign direct investment, financial development and other macroeconomic variables like trade openness, domestic investment and labour force and that of GDP per capita in select South Asian countries, i.e. India, Sri Lanka and Pakistan for the period 1990–2018.Design/methodology/approachThe study uses various econometrics tools such as Pedroni, Kao and Johansen–Fisher panel cointegration test, Panel FMOLS and DOLS and Granger causality in order to analyse the long-run and short-run dynamics among the variables under consideration.FindingsThe results of the panel data estimation techniques employed imply that there is a short-run causality running from GDP per capita to FDI and financial development, and results from FMOLS and DOLS indicate that FDI and financial development have positive impacts on GDP per capita in the countries under consideration.Originality/valueIn this paper, we use a dynamic macroeconomic modelling framework to examine the effect of FDI and financial development on per capita income in three major south Asian economies, which are categorized as three Non-Least Developed Contracting States under the South Asian Free Trade Area (SAFTA), 2006, established with an aim to facilitate free trade among them. Considering the diversity of the level of growth experienced by these economies, the study uses appropriate panel regression techniques. Therefore, in addition to proper formulation of policies directed towards scaling up of export and import levels, the respective authorities should also take care that the political stability and institutional quality are maintained.

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