Capital Goods Prices, Global Capital Markets and Accumulation, 1870-1950, Issue 7145
National Bureau of Economic Research, 1999 - Capital market - 46 pages
Abstract: Conventional wisdom has it that global financial markets were as well integrated in the 1890s as in the 1990s, but that it took several post-war decades to regenerate the connections that existed before 1914. This view has emerged from a variety of tests for world financial capital market integration ranging from the correlation of saving and investment aggregates to the dispersion of security prices and real interest rates. Presumably, we care about global capital market integration because it can have an impact on accumulation performance and the global distribution of the capital stock. Oddly enough however, the relative price of capital goods, an important component of the user cost of capital has never been incorporated into studies of capital market integration and almost never in comparative studies of pre-1950 economic growth. This could be an important omission. This paper explores the issue with a panel data base 1870-1950 for eleven OECD countries. It turns out that capital goods prices have been central to accumulation, and therefore to growth and convergence. They have also been as important to the evolution of global capital markets as have been interest rates and other financial costs.
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Alan Taylor APk/Pk Australia B. R. Mitchell benchmark Butlin calculated Canada capital deepening capital goods prices capital goods relative capital market integration changes cheap capital coefﬁcient Collins Jeffrey constant price investment Constant Price Value consumption goods prices cost of capital countries Current and Constant decline Dependent Variable Economic Growth Economic History ﬁnding Firestone 1958 GDP per capita Germany global capital market IHSE impact Index for Capital Index for Consumption Index for Machinery Italy Japan Journal of Economic Kuznets Ln Initial GDP Machinery and Equipment N. G. Butlin national accounts NBER Norway O’Rourke Obstfeld and Taylor Penn World Tables percent period Peter Temin price data price dispersion Price Index price of capital price of equipment price series producer durables real interest rates regression relative capital relative price sample Simon Kuznets statistically signiﬁcant SWE UK Sweden Table 2a tariffs United user cost Value of GDP Value of Investment Williamson 1995