Merchant Bank Acceptances and the British Economy, 1880-1913

Abstract

This paper examines the role of an important type of instrument in international trade financing - the merchant bank acceptance - in the pre-WW1 British economy. A new dataset on merchant bank acceptances from 1880 to 1913 is analysed through the lens of recent developments in time series econometrics. The results indicate that the growth of merchant banks acceptances had a significant positive impact not only on British trade, but also on the domestic economy. The British economy thus benefited from having London as a hub for global trade financing.