Crowding Out during Britain's Industrial Revolution
- 3 March 1990
- journal article
- research article
- Published by Cambridge University Press (CUP) in The Journal of Economic History
- Vol. 50 (1) , 109-131
- https://doi.org/10.1017/s0022050700035749
Abstract
Contrary to earlier assertions, the historical data for Britain do confirm a (lagged) crowding-out effect during the Industrial Revolution. Heavy government borrowing after 1793 for the wars with France raised interest rates. These results are confirmed with nominal-interest-rate equations rather than with real-rate equations, which impose restrictive assumptions about the adjustment of nominal rates to inflation expectations. We see no reason to abandon the neoclassical, factor- allocation model of saving and investment in favor of a theory asserting that firms accumulate capital for investment independently of household saving decisions.Keywords
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