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

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  • Wilfried Kisling

    (University of Oxford
    WU Wirtschaftsuniversität Wien)

  • Marco Molteni

    (University of Oxford
    Geneva Graduate Institute)

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 first wave of globalisation. Using monthly data between 1889 and 1913, we find 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 floating 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 floating rate as an instrumental variable (IV) to show that this relationship is causal. Although there is a significant amount of literature on London’s historic role as a global financial 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 first globalisation: evidence from Brazil," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 19(1), pages 81-122, January.
    • Handle: RePEc:spr:cliomt:v:19:y:2025:i:1:d:10.1007_s11698-024-00284-5
    DOI: 10.1007/s11698-024-00284-5
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    References listed on IDEAS

    as
    1. Flandreau, Marc & Jobst, Clemens, 2005. "The Ties that Divide: A Network Analysis of the International Monetary System, 1890–1910," The Journal of Economic History, Cambridge University Press, vol. 65(4), pages 977-1007, December.
    2. Olivier Accominotti & Delio Lucena‐Piquero & Stefano Ugolini, 2021. "The origination and distribution of money market instruments: sterling bills of exchange during the first globalization," Economic History Review, Economic History Society, vol. 74(4), pages 892-921, November.
    3. repec:hal:spmain:info:hdl:2441/605 is not listed on IDEAS
    4. Flandreau, Marc & Jobst, Clemens, 2005. "The Ties that Divide. A Network Analysis of the International Monetary System," CEPR Discussion Papers 5129, C.E.P.R. Discussion Papers.
    5. Klasing, Mariko J. & Milionis, Petros, 2014. "Quantifying the evolution of world trade, 1870–1949," Journal of International Economics, Elsevier, vol. 92(1), pages 185-197.
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    7. Béatrice Dedinger & Paul Girard, 2017. "Exploring trade globalization in the long run: The RICardo project," Historical Methods: A Journal of Quantitative and Interdisciplinary History, Taylor & Francis Journals, vol. 50(1), pages 30-48, January.
    8. Wilfried Kisling, 2023. "‘Los von London’: A comparative, empirical analysis of German and British global foreign banking and trade development, 1881–1913," Economic History Review, Economic History Society, vol. 76(2), pages 445-476, May.
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    More about this item

    Keywords

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

    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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