International Capital Mobility in History: The Saving-Investment Relationship

Economic historians have been concerned with the evolution of international capital markets over the long run, but empirical testing of market integration has been limited. This paper augments the literature by investigating long- and short-run criteria for capital mobility using time-series and cross-section analysis of saving-investment correlation for twelve countries since 1850. The results present a nuanced picture of capital market evolution. The sample shows considerable cross-country heterogeneity. Broadly speaking, the inter-war period, and especially the Great Depression, emerge as an era of diminishing capital mobility, and only recently can we observe a tentative return to the degree of capital mobility witnessed during the late nineteenth century.