FIGURE 3-10
imageMilitary Spending and the Interest Rate in the United Kingdom This figure shows military spending as a percentage of GDP in the United Kingdom from 1730 to 1919. Not surprisingly, military spending rose substantially during each of the eight wars of this period. This figure also shows that the interest rate (here the rate on a government bond called a consol) tended to rise when military spending rose.
Source: Series constructed from various sources described in Robert J. Barro, “Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701-1918,” Journal of Monetary Economics 20 (September 1987): 221-248.