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The London money market and non-British bank lending during the frst globalisation: evidence from Brazil

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  • Wilfried Kisling

    (Faculty of History, University of Oxford, Oxford, UK ; WU Wirtschaftsuniversität Wien, Vienna, Austria)

  • Marco Molteni

    (Faculty of History, University of Oxford, Oxford, UK ; Geneva Graduate Institute, Geneva, Switzerland)

Abstract

This study examines the relationship between the London money market (LMM) and the credit provision of non-British overseas banks in peripheral economies during the frst wave of globalisation. Using monthly data between 1889 and 1913, we fnd a positive relationship between the amount of credit authorised by the German Brasilianische Bank für Deutschland in Brazil and the spread between the London market and foating rate. Our results suggest that increased demand for foreign bills and/or decreased borrowing costs in the LMM leads to an increase in credit supply. We use the impact of annual tax payments on the spread between the market and foating rate as an instrumental variable (IV) to show that this relationship is causal. Although there is a signifcant amount of literature on London’s historic role as a global fnancial centre and a growing number of studies on foreign banking history, little quantitative evidence is available about the connection between the two. This study bridges this gap.

Suggested Citation

  • Wilfried Kisling & Marco Molteni, 2025. "The London money market and non-British bank lending during the frst globalisation: evidence from Brazil," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 19(1), pages 81-122, January.
    • Handle: RePEc:afc:cliome:v:19:y:2025:i:1:p:81-122
    DOI: 10.1007/s11698-024-00284-5
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    Keywords

    London money market · First wave of globalisation · Non-British overseas banks · German foreign banks · Sterling dominance · International banking before 1914;

    JEL classification:

    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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