Financial globalization in the 19th century: Germany as a financial center Julia Bersch1 and Graciela L. Kaminsky2 This version: September 2008 We analyze the capital exports of Germany between 1883 and 1914 to study its importance as a financial center. Therefore, we collected data on foreign securities issued on German stock exchanges from primary sources. We find that Germany specialized in lending to European countries, mostly to Austria-Hungary, Russia and Italy, and was competing with France in lending to these countries. Indeed we show that shocks to the French interest rates affected German foreign investment. Great Britain, the largest international financial center, was not competing in lending to European countries but specialized in lending to previous colonies and to North and Latin America. As Germany’s lending to the Americas accounted only for a low share of its foreign investment and was negligible compared to Great Britain’s, shocks to the interest rates in London did not affect overall foreign issuances in Germany. JEL: F21; N20; N23 Keywords: Capital flows, international issuances, financial centers, Germany 1Ludwig-Maximilians-University Munich and Munich Graduate School of Economics, e-mail:
[email protected]. 2George Washington University 1 Introduction Financial globalization is not a new phenomenon of the late 20th century. An important era of financial globalization and integration took already place in the 19th century. In the 19th century, Europe was the world’s banker, lending capital to countries around the world (Feis, 1930). The main capital exporter was Great Britain, followed by France and Germany, and their capital cities were the main financial centers intermediating credit through their stock exchanges and bankers.