This study, aiming to explain the synchronisation of the national trade cycles in pre-WWI years, begins with a review of trade cycle theories. The pattern of international trade cycles in 1870-1914 are then examined and their structures discussed: the US and German home investment and British overseas lending are found to form major initial cyclical shocks. The short term fluctuations in the US and German domestic capital formation in pre-1914 period are shown to be closely related to technological development such as railways and electricity; the shifts in both the push of British home investment and savings conditions and the pull of capital importing regions are held responsible for the cyclical variations in British foreign investment. Cyclical patterns identified in money stocks of various countries are argued to result mainly from procyclical shifts in demand for money. Focusing then our attention upon the course of one international trade cycle in 1885-1896 in the US, Germany, Britain and Argentina, we find that the international upswing in the latter half of the 1880s was initiated by the start of railway building boom in the US as a consequence of the improvement in railway profitability due to agricultural development around the railways built during the previous boom in western states such as Kansas and Nebraska; the termination of largely British-financed Argentine railway construction boom due to overbuilding played an important role in triggering the world-wide depression in the early 1890s. These initial disturbances seemed to be diffused throughout the world mainly via trade and psychological channels. In contrast, it is demonstrated that international gold flows were not translated into significant monetary shocks, since banking systems were able to vary in a flexible manner supply of deposits according to demand; nor did financial crises, tending to break out after the downturn in the level of activity, seem to constitute major channels of transmission of cyclical shocks. As to the relevance of various types of trade cycle theories to the explanation of the cyclical experiences in the ten-odd years concerned, it is therefore concluded that the fluctuations in cyclical origins, e.g. US and Argentina, can largely be understood in the context of Schumpeterian theory of innovation; that although the shifts in expectations were not so purely autonomous as Keynes thought, they played important parts in the transmission of cyclical shocks from the origins to Germany and Britain; that Hicksian full employment ceiling did not seem to develop in any of the four countries, which was probably to a great extent due to relatively free international trade and factor mobility; that weak multiplier- accelerator model kept alive by random shocks captures essential aspects of the pre-1914 British trade cycles; finally that monetary disturbances, such as gold flows and financial crises, did not appear important in either creating or transmitting cyclical forces.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:234505 |
| Date | January 1988 |
| Creators | Cha, Myung Soo |
| Publisher | University of Warwick |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://wrap.warwick.ac.uk/98789/ |
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