Hostname: page-component-586b7cd67f-l7hp2 Total loading time: 0 Render date: 2024-11-22T20:34:21.190Z Has data issue: false hasContentIssue false

Political regimes and sovereign credit risk in Europe, 1750–1913

Published online by Cambridge University Press:  01 April 2009

MARK DINCECCO*
Affiliation:
Department of Economics, IMT Lucca Institute for Advanced Studies, Piazza San Ponziano 6, Lucca, Italy, 55100, [email protected]
Get access

Abstract

This article uses a new panel data set to perform a statistical analysis of political regimes and sovereign credit risk in Europe from 1750 to 1913. Old Regime polities typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. Panel regressions indicate that centralized and/or limited regimes were associated with significant improvements in credit risk relative to fragmented and absolutist ones. Structural break tests also reveal close relationships between major turning points in yield series and political transformations.

Type
Research Article
Copyright
Copyright © European Historical Economics Society 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D., Johnson, S. and Robinson, J. (2002). Reversal of fortune: geography and development in the making of the modern world income distribution. Quarterly Journal of Economics 117, pp. 1231–94.CrossRefGoogle Scholar
Acemoglu, D., Johnson, S. and Robinson, J. (2005). The rise of Europe: Atlantic trade, institutional change, and economic growth. American Economic Review 94, pp. 546–79.CrossRefGoogle Scholar
Bai, J. and Perron, P. (2003). Computation and analysis of multiple structural-change models. Journal of Applied Econometrics 18, pp. 122.CrossRefGoogle Scholar
Bairoch, P. (1988). Cities and Economic Development: From the Dawn of History to the Present. Chicago: University of Chicago Press.Google Scholar
Beck, N. and Katz, J. (1995). What to do (and not to do) with time-series cross-section data. American Political Science Review 89, pp. 634–47.CrossRefGoogle Scholar
Birmingham, D. (1993). A Concise History of Portugal. Cambridge: Cambridge University Press.Google Scholar
Bonney, R. (1995). Economic Systems and State Finance. Oxford: Oxford University Press.CrossRefGoogle Scholar
Bonney, R. (1999). The Rise of the Fiscal State in Europe, 1200–1815. Oxford: Oxford University Press.CrossRefGoogle Scholar
Bordo, M. and Cortés-Conde, R. (eds.) (2001). Transferring Wealth and Power from the Old to the New World: Monetary and Fiscal Institutions in the Seventeenth through the Nineteenth Centuries. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Bordo, M. and Rockoff, H. (1996). The gold standard as a good housekeeping seal of approval. Journal of Economic History 56, pp. 389428.CrossRefGoogle Scholar
Brewer, J. (1989). The Sinews of Power: War, Money, and the English State, 1688–1783. London: Unwin Hyman.Google Scholar
Brown, W. and Burdekin, R. (2000). Turning points in the US Civil War: a British perspective. Journal of Economic History 60, pp. 216–31.CrossRefGoogle Scholar
Brown, W., Burdekin, R. and Weidenmier, M. (2006). Volatility in an era of reduced uncertainty: lessons from Pax Brittanica. Journal of Financial Economics 79, 693707.CrossRefGoogle Scholar
Cain, P. J. and Hopkins, A. G. (1994). British Imperialism. London: Longman.Google Scholar
Clark, G. (1996). The political foundations of modern economic growth: England, 1540–1800. Journal of Interdisciplinary History 26, pp. 563–88.CrossRefGoogle Scholar
Clodfelter, M. (2002). Warfare and Armed Conflicts: A Statistical Reference to Casualty and Other Figures, 1500–2000, 2nd edn. Jefferson: McFarland.Google Scholar
Cust, R. (1987). The Forced Loan and English Politics, 1626–1628. Oxford: Clarendon Press.Google Scholar
Davis, L. and Huttenback, R. (1986). Mammon and the Pursuit of Empire: The Political Economy of British Imperialism. Cambridge: Cambridge University Press.Google Scholar
De Vries, J. (1984). European Urbanization, 1500–1800. Cambridge, MA: Harvard University Press.Google Scholar
Dickson, P. (1967). The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756. New York: St Martin's Press.Google Scholar
Dincecco, M. (2009a). Fiscal centralization, limited government, and public revenues in Europe, 1650–1913. Journal of Economic History 69, pp. 48103.CrossRefGoogle Scholar
Dincecco, M. (2009b). The political economy of fiscal prudence in historical perspective. Forthcoming, Economics & Politics.CrossRefGoogle Scholar
The Economist.Google Scholar
Epstein, S. R. (2000). Freedom and Growth: Markets and States in Europe, 1300–1750. London: Routledge.CrossRefGoogle Scholar
Encyclopedia Britannica 2007.Google Scholar
Ferguson, N. (1998). The House of Rothschild: Money's Prophet, 1798–1848. New York: Penguin.Google Scholar
Ferguson, N. (2006). Political risk and the international bond market between the 1848 revolution and the outbreak of the First World War. Economic History Review 59, pp. 70112.CrossRefGoogle Scholar
Ferguson, N. and Schularick, M. (2006). The empire effect: determinants of country risk in the first age of globalization, 1880–1913. Journal of Economic History 66, pp. 283312.CrossRefGoogle Scholar
Flandreau, M. and Zumer, F. (2004). The Making of Global Finance, 1880–1913. Paris: OECD.Google Scholar
Frey, B. and Kucher, M. (2000). History as reflected in capital markets: the case of World War II. Journal of Economic History 60, pp. 468–96.CrossRefGoogle Scholar
Fritschy, W. (2007). The efficiency of taxation in Holland. In Gelderblom, O. (ed.), The Political Economy of the Dutch Republic. London: Ashgate.Google Scholar
Fritschy, W., t'Hart, M. and Horlings, E. (2001). Continuities and discontinuities in Dutch fiscal history, 1515–1913. Mimeo, Thirteenth Economic History Congress.Google Scholar
Fritschy, W. and van der Voort, R. (1997). From fragmentation to unification: public finance, 1700–1914. In t'Hart, M., Jonker, J. and van Zanden, J. L. (eds.), A Financial History of the Netherlands. Cambridge: Cambridge University Press.Google Scholar
Greene, W. (2000). Econometric Analysis, 4th edn. Upper Saddle River: Prentice-Hall.Google Scholar
Hill, C. (1980). The Century of Revolution, 1603–1714. Walton-on-Thames: Nelson.Google Scholar
Hirst, D. (1986). Authority and Conflict: England, 1603–1658. Cambridge, MA: Harvard University Press.Google Scholar
Hoffman, P. and Norberg, K. (1994). Fiscal Crises, Liberty, and Representative Government, 1450–1789. Palo Alto: Stanford University Press.CrossRefGoogle Scholar
Hoffman, P. and Rosenthal, J. L. (1997). The political economy of warfare and taxation in early modern Europe: historical lessons for economic development. In Drobak, J. and Nye, J. (eds.), The Frontiers of the New Institutional Economics. St Louis: Academic Press.Google Scholar
Hohenberg, P. and Lees, L. (1985). The Making of Urban Europe, 1000–1950. Cambridge, MA: Harvard University Press.Google Scholar
Homer, S. and Sylla, R. (1991). A History of Interest Rates. New Brunswick, NJ: Rutgers University Press.Google Scholar
Jackson, H. (1974). A Short History of France from Early Times to 1972. Cambridge: Cambridge University Press.Google Scholar
Jones, J. (1972). The Revolution of 1688 in England. London: Weidenfeld and Nicolson.Google Scholar
Kiser, E. and Schneider, J. (1994). Bureaucracy and efficiency: an analysis of taxation in early modern Prussia. American Sociological Review 59, pp. 187204.CrossRefGoogle Scholar
Kindleberger, C. (1984). A Financial History of Western Europe. London: Allen and Unwin.Google Scholar
La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2008). The economic consequences of legal origins. Journal of Economic Literature 46, pp. 285332.CrossRefGoogle Scholar
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1997). Legal Determinants of External Finance. Journal of Finance 52, 1131–50.CrossRefGoogle Scholar
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1998). Law and finance. Journal of Political Economy 106, pp. 1113–55.CrossRefGoogle Scholar
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1999). The quality of government. Journal of Law, Economics, and Organization 15, pp. 222–79.CrossRefGoogle Scholar
Le Moniteur Universel.Google Scholar
Maandelijksche Hollandsche Mercurius.Google Scholar
Maddison, A. (2003). The World Economy: Historical Statistics. Paris: OECD.CrossRefGoogle Scholar
Mata, E. and Valerio, N. (2002). Història econòmica de Portugal. Lisbon: Editorial Presença.Google Scholar
Mathias, P. and O'Brien, P. (1976). Taxation in Britain and France, 1715–1810: a comparison of the social and economic incidence of taxes collected for the central governments. Journal of European Economic History 5, pp. 601–50.Google Scholar
Mauro, P., Sussman, N. and Yafeh, Y. (2002). Emerging market spreads: then versus now. Quarterly Journal of Economics 117, pp. 695733.CrossRefGoogle Scholar
Meissner, C. (2005). A new world order: explaining the emergence of the classic gold standard. Journal of International Economics 6, pp. 385406.CrossRefGoogle Scholar
Mitchener, K. and Weidenmier, M. (2005). Empire, public goods, and the Roosevelt corollary. Journal of Economic History 65, pp. 658–92.CrossRefGoogle Scholar
Mokyr, J. (1998). The Second Industrial Revolution, 1870–1914. In Castronono, V. (ed.), Storia dell'economia Mondiale. Rome: Laterza.Google Scholar
Mokyr, J. (1999). The British Industrial Revolution: An Economic Perspective. Boulder, CO: Westview.Google Scholar
National Accounts of the Netherlands. nationalaccounts.niwi.knaw.nlGoogle Scholar
North, D. and Weingast, B. (1989). Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-century England. Journal of Economic History 49, pp. 803–32.CrossRefGoogle Scholar
O'Brien, P. (2001). Fiscal exceptionalism: Great Britain and its European rivals, from Civil War to triumph at Trafalgar and Waterloo. Working Paper 65/01, London School of Economics.Google Scholar
Obstfeld, M. and Taylor, A. (2003). Sovereign risk, credibility, and the gold standard: 1870–1913 versus 1925–31. Economic Journal 113, pp. 241–75.CrossRefGoogle Scholar
Price, R. (1993). A Concise History of France. Cambridge: Cambridge University Press.Google Scholar
Prijscourant der Effecten.Google Scholar
Quinn, S. (2001). The Glorious Revolution's effect on English private finance: a microhistory, 1680–1705. Journal of Economic History 61, pp. 593615.Google Scholar
Reinhart, C., Rogoff, K. and Savastano, M. (2003). Debt intolerance. Brookings Papers on Economic Activity, 1, pp. 174.CrossRefGoogle Scholar
Rosenthal, J. L. (1998). The political economy of absolutism reconsidered. In Bates, R. et al. . (eds.), Analytic Narratives. Princeton: Princeton University Press.Google Scholar
Rosenthal, J. L. and Wong, R. B. (2007). Warfare and economic growth in China and Europe. Mimeo, University of California, Los Angeles.Google Scholar
Sacks, D. (1994). The paradox of taxation: fiscal crises, parliament, and liberty in England, 1450–1640. In Hoffman, P. and Norberg, K. (eds.), Fiscal Crises, Liberty, and Representative Government, 1450–1789. Palo Alto: Stanford University Press.Google Scholar
Sargent, T. and Velde, F. (1995). Macroeconomic features of the French Revolution. Journal of Political Economy 103, pp. 474518.CrossRefGoogle Scholar
Stasavage, D. (2003). Public Debt and the Birth of the Democratic State: France and Great Britain, 1688–1789. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Stasavage, D. (2005). Cities, constitutions, and sovereign borrowing in Europe, 1274–1785. International Organization 61, pp. 489526.Google Scholar
Stone, L. (1979). The Crisis of the Aristocracy, 1558–1641. Oxford: Clarendon Press.Google Scholar
Summerhill, W. (2004). Inglorious revolution: political institutions, sovereign debt, and financial underdevelopment in imperial Brazil. Mimeo, University of California, Los Angeles.Google Scholar
Sussman, N. and Yafeh, Y. (2000). Institutions, reforms, and country risk: lessons from Japanese government debt in the Meiji era. Journal of Economic History 60, pp. 442–67.CrossRefGoogle Scholar
Sussman, N. and Yafeh, Y. (2006). Institutional reforms, financial development, and sovereign debt: Britain, 1690–1790. Journal of Economic History 66, pp. 906–35.CrossRefGoogle Scholar
t'hart, M. (1997). The merits of a financial revolution: public finance, 1550–1700. In t'Hart, M., Jonker, J. and van Zanden, J. L. (eds.), A Financial History of the Netherlands. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Tilly, C. (1990). Coercion, Capital, and European States, 990–1990. Cambridge: Blackwell.Google Scholar
Tilly, R. (1966). The political economy of public finance and the industrialization of Prussia, 1815–1866. Journal of Economic History 26, pp. 484–97.CrossRefGoogle Scholar
Tilly, R. (1967). The political economy of public finance and the industrialization of Prussia: a correction. Journal of Economic History 27, p. 391.Google Scholar
Tortella, G. (2000). The Development of Modern Spain: An Economic History of the Nineteenth and Twentieth Centuries. Cambridge, MA: Harvard University Press.Google Scholar
Tortella, G. and Comín, F. (2001). The merits of a financial revolution: public finance, 1550–1700. In Bordo, M. and Cortés-Conde, R. (eds.), Transferring Wealth and Power from the Old to the New World: Monetary and Fiscal Institutions in the Seventeenth through the Nineteenth Centuries. Cambridge: Cambridge University Press.Google Scholar
Velde, F. and Weir, D. (1992). The financial market and government debt policy in France, 1746–1793. Journal of Economic History 52, pp. 139.CrossRefGoogle Scholar
Weir, D. (1989). The financial market and government debt policy in France, 1746–1793. Journal of Economic History 52, pp. 139.Google Scholar
White, E. (1989). Was there a solution to the Ancien Régime's financial dilemma? Journal of Economic History 49, pp. 545–68.CrossRefGoogle Scholar
White, E. (1995). The French Revolution and the politics of government finance, 1770–1815. Journal of Economic History 55, pp. 227–55.CrossRefGoogle Scholar
White, E. (2001). France and the failure to modernize macroeconomic institutions. In Bordo, M. and Cortés-Conde, R. (eds.), Transferring Wealth and Power from the Old to the New World: Monetary and Fiscal Institutions in the Seventeenth through the Nineteenth Centuries. Cambridge: Cambridge University Press.Google Scholar
Willard, K., Guinnane, T. and Rosen, H. (1996). Turning points in the Civil War: views from the greenback market. American Economic Review 86, 1001–18.Google Scholar
Wooldridge, J. (2003). Introductory Econometrics: A Modern Approach, 2nd edn. Mason: Thomson South-Western.Google Scholar
Zanden van, J. L. and Prak, M. (2006). Towards an economic interpretation of citizenship: the Dutch Republic between medieval communes and modern nation-states. European Review of Economic History 10, pp. 111–45.CrossRefGoogle Scholar
Zanden van, J. L. and Riel van, A. (2004). The Strictures of Inheritance: The Dutch Economy in the Nineteenth Century. Princeton: Princeton University Press.CrossRefGoogle Scholar