Financial Development, Trade Openness and Growth during the First Wave of Globalization

Alexandra D'ONOFRIO Centre Arcelli d'études monétaires et financières (CASMEF), Université LUISS Guido Carli (Italie). Contact : alexandra.donofrio@gmail.com.

Peter L. ROUSSEAU Professeur, Département d'économie, Vanderbilt University (États-Unis). Contact : Peter.L.Rousseau@Vanderbilt.Edu.

Did financial development and international trade reinforce each other and drive economic growth more than a century ago? We investigate these linkages among 17 countries during the first wave of economic globalization (1850-1929). Cross-country dynamic panels as well as VARs and VECMs for individual countries indicate that financial development led both trade and growth at this time, while trade largely responded to financial development.