Wilfried A. Kisling - Finance and Trade

"Los von London" - A comparative, empirical analysis of German and British global foreign banking and trade development, 1881-1913 (Economic History Review)

The role of finance in the development of trade draws increasing attention to economics and economic historians. Yet, empirical studies, especially from an historical perspective, continue to be scarce. This study analyses the role of German and British foreign banks in the internationalization of trade during the first globalization. It creates a novel data set on the bilateral trade of Germany and Great Britain with the rest of the world and the number and geographical distribution of German and British foreign banks between 1881 and 1913. Using an augmented gravity model of trade, I show that banks had a significant positive impact on exports and imports and that this effect was even more pronounced in case of German banks and trade. Moreover, the effect of German banks on trade is the highest in the years closer to bank entry, supporting the idea of German banks being initiators of trade. In contrast, the effect of British banks increases over time.

International Banks: Re-Agents of Globalization?

(with Christopher Meissner, University of California, Davis, and Chenzi Xu, Stanford GBS)

We introduce novel data on the universe of multinational banking activity during the first age of globalization from 1870–1914 and show that these financial connections significantly increased trade volumes. First, we describe the data and show that the distribution of countries ‘exporting’ banks is very skewed: the top four exporters are responsible for almost 80% of all multinational banks. Second, we show that there is a significant positive relationship between a multinational banking connection and exports using a standard gravity framework. We also employ a near-neighbors approach to disentangle the causal effect of bank entry from the possibility that banks simply anticipated exports growth.

The project is funded by British Academy/Leverhulme Small Research Grant - Economic Growth, International Trade and Finance: Evidence from the First Multinational Banks – SRG18R1\181107

German Trade Finance During the Second Industrial Revolution. La Batalla de Buenos Aires, 1875-1913 (Oxford Economic and Social History Working Papers)

(with Antonio Tena Junguito, University Carlos III)

We identify and analyze the determinants of the success of German exports to Argentina between 1875 and 1913, the fastest emerging market in South America at that time. New German technology and increasing productivity were complemented by banking and financial support for trade. We find that industrial sectors linked to German foreign banks (Auslandsbanken) in Argentina benefited from privileged access to financial support and hence exported more in comparison with other leading industrial countries. Our findings contribute to the literature on Latin American emerging markets and the role of finance in the development of foreign trade

A Microanalysis of Trade Finance: German bank entry and coffee exports in Brazil, 1880-1913 (European Review of Economic History)

The trade-finance nexus has enjoyed increasing interest in recent economic studies, but empirical evidence is scarce and studies from a historical perspective seem missing. This study analyses the effect of German bank entry on Brazilian coffee exports between 1880 and 1913 using firm-level data. I create an original data set on the yearly quantities of exported coffee and the credit received from the German Brasilianische Bank für Deutschland by export houses in Brazil. Using a difference-in-difference approach, I find that Brasilianische eased previously existing credit constraints, and that companies financed by Brasilianische exported significantly more than those that were not.

La financiación del comercio: bancos alemanes y británicos en el Brasil del siglo XIX (Book)

The Qualitative evidence affirms that the principal objective of the first German Auslandsbanken (foreign banks) founded in the nineteenth century was to provide financial assistance to the foreign trade sector and engage in those markets where German trade only started to evolve. This contrasts British foreign banks that developed along trade and concentrated their activities primary on the increasing investment opportunities in the prospering peripheral markets. The preeminent feature of German banks in financing trade was to offer comparatively better credit conditions than their competitors did. This study analyses and compares the role of German and British banks in trade finance in Brazil, one of the emerging economies and focus of German and British foreign banking and trade in the late nineteenth and early twentieth centuries. Examining the monthly credit performance of the Brasilianische Bank für Deutschland and the London and Brazilian Bank, the two largest German and British banks in Brazil at that time, it provides empirical evidence that the Brasilianische directed significantly more credit to the trade sector than the London and Brazilian, in both, relative and total terms.

Trade finance in historical perspective: The role of German Banks in the rise of Germany as international trade power, 1875 – 1913

Less than 30 years after its foundation, 1871, the German Empire had become the second most important trade nation in the world after the United Kingdom. German banks were a key element of this success, creating the first Auslandsbanken (foreign banks) that ensured the financial independence of German trade. My PhD thesis.

The first article of my dissertation studies the capacity of foreign banks to promote trade by providing financial assistance abroad. It argues that the Auslandsbanken were key factors in the dynamics of German trade expansion, and moreover played a more pivotal role in the establishment of external trade than the British banks. The aim of the second article is to identify and analyze the determinants of the success of German exports in comparison with the exports of other leading industrial economies to Argentina between 1875 and 1913. Concretely, it concentrates on the effect of German bank entry. The major hypothesis is that German export companies connected to German banks operating in Argentina benefited from relatively easier access to financial support and privileged information in the Argentine market; in other words, a reduction of transaction costs and information asymmetry. As a result, Germany exported more of those products that were exported by one or more companies connected to the banks. The aim of the third article is to empirically address the questions whether the Brasilianische’s entry contributed to easing firms’ credit constraints in the coffee market, and how its entry affected the export performance of financed coffee export houses (see published paper above)