Financial Deepening and Economic Growth During the US Antebellum Era 1834-1863

Abstract

This paper empirically investigates the relationship between financial deepening and the US economic growth during the antebellum period 1834-1863 and the causal direction between them applying the VEC model. The ADF unit root and the Zivot-Andrea Unit Root with structural break test are performed before applying VEC. The results of the Granger causality/block exogeneity Wald tests show that the financial deepening did not have Granger caused economic growth of the antebellum America rather it was the economic growth that led to the financial development. The finding contradicts the findings of Bodenhorn (2000) and confirms the findings of Samad (2007).