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Crises and Punishment: Moral Hazard and the Pre-1914 International Financial Architecture

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Flandreau, Marc

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Abstract

This Paper argues that the backbone of the pre-1914 international financial architecture was the concern about moral hazard. No decentralized system can leave without safeguards against free riding and this typically means that problem countries must find by themselves the means to fix their domestic problems. We review the origins of crises as well as the remedies that were commonly applied one century ago and find that the international financial world was fairly similar to the setting in which we live today, and this for the same reasons. Today, just like one century ago, in the absence of an international lender of last resort with huge regulatory powers, countries must muddle through, with the occasional - and imperfect - help of international finance.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3742.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3742

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Related research
Keywords: financial architecture; financial crises; moral hazard; relationship banking; self insurance;

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative
N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fenoaltea, Stefano, 1988. "International resource flows and construction movements in the atlantic economy: the kuznets cycle in Italy, 1861?1913," The Journal of Economic History, Cambridge University Press, vol. 48(03), pages 605-637, September. [Downloadable!]
  2. Flandreau, Marc & Le Cacheux, Jacques & Zumer, Frédéric, 1998. "Stability Without a Pact? Lessons from the European Gold Standard 1880-1914," CEPR Discussion Papers 1872, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Flandreau, Marc & Komlos, John, 2001. "How to Run a Target Zone? Age Old Lessons from an Austro-Hungarian Experiment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January. [Downloadable!] (restricted)
  5. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, 04. [Downloadable!] (restricted)
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  6. Thakor, Anjan V., 2000. "Relationship Banking," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 3-5, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christopher M Meissner & Michael D Bordo, 2006. "The Role of Foreign Currency Debt in Financial Crises: 1880-1913 vs. 1972-1997," WEF Working Papers 0001, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]
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