The London Money Market and Non-British Bank Lending During the First Globalisation: Evidence from Brazil
Author Information
Author(s): Kisling Wilfried, Molteni Marco
Primary Institution: University of Oxford
Hypothesis
Does the London money market influence the credit provision of non-British overseas banks in peripheral economies during the first wave of globalisation?
Conclusion
The study finds a positive relationship between the London money market and the credit supply of the Brasilianische Bank in Brazil, suggesting that increased demand for foreign bills and lower borrowing costs lead to more credit being authorized.
Supporting Evidence
- The study provides robust evidence that the relationship between the London spread and credit provision is causal.
- OLS regression results indicate a significant positive correlation between the London market spread and the monthly credit authorized by the Brasilianische Bank.
- Instrumental variable analysis supports the findings, confirming the robustness of the results.
Takeaway
This study shows that when the London money market is doing well, a German bank in Brazil can lend more money. It's like saying if the money in London is flowing easily, then the bank in Brazil can help more people with loans.
Methodology
The study uses OLS regression and instrumental variable approaches to analyze monthly data from 1889 to 1913.
Potential Biases
Potential biases may arise from the reliance on historical data and the specific focus on one bank's operations.
Limitations
The model may be subject to omitted variable bias, and the historical context may limit the generalizability of the findings.
Participant Demographics
The study focuses on the Brasilianische Bank for Deutschland, which operated in Brazil during the late 19th and early 20th centuries.
Statistical Information
P-Value
p<0.01
Statistical Significance
p<0.01
Digital Object Identifier (DOI)
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