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Previous financial crises leading to stagnation – selected case studies

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Author Info

  • Nina Dodig

    (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE))

  • Hansjorg Herr

    (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE))

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    Abstract

    This paper analyses several severe financial crises observed in the history of capitalism which led to a longer period of stagnation or low growth. Comparative case studies of the Great Depression, the Latin American debt crisis of the 1980s and the Japanese crisis of the 1990s and 2000s are presented. The following questions are asked: What triggered big financial crises? Which factors intensified financial crises? And most importantly, which factors prevented the return of prosperity for a long time? The main conclusion is that stagnation after big financial crises becomes likely when the balance sheets of economic units are not quickly cleaned, when the nominal wage anchor breaks, and when there is no big and longer growth stimulus by the state. Some tentative conclusions for the subprime financial crisis and the Great Recession are drawn.

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    File URL: http://fessud.eu/wp-content/uploads/2013/04/FESSUD-Working-Paper-Previous-financial-crises-leading-to-stagnation-13022014-working-paper-24.pdf
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    Bibliographic Info

    Paper provided by Financialisation, Economy, Society & Sustainable Development (FESSUD) Project in its series Working papers with number wpaper24.

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    Length: 77 pages
    Date of creation: 15 Feb 2014
    Date of revision:
    Handle: RePEc:fes:wpaper:wpaper24

    Contact details of provider:
    Postal: FESSUD Co-ordinator (Malcolm Sawyer) Leeds University Business School Maurice Keyworth Buidling Leeds LS2 9JT

    Related research

    Keywords: financial crises; stagnation; deflation; lost decade; Great Depression; Latin American debt crisis; Japanese crisis; Great Recession;

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    References

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    1. Christina D. Romer, 1991. "What Ended the Great Depression?," NBER Working Papers 3829, National Bureau of Economic Research, Inc.
    2. repec:cml:moneta:v:i:y:2013:i:1:p:87-165 is not listed on IDEAS
    3. Simon Kuznets, 1937. "National Income and Capital Formation, 1919-1935," NBER Books, National Bureau of Economic Research, Inc, number kuzn37-1, October.
    4. Holt, Charles F., 1977. "Who benefited from the prosperity of the twenties?," Explorations in Economic History, Elsevier, vol. 14(3), pages 277-289, July.
    5. Dighe, Ranjit S. & Schmitt, Elizabeth Dunne, 2010. "Did U.S. wages become stickier between the world wars?," The North American Journal of Economics and Finance, Elsevier, vol. 21(2), pages 165-181, August.
    6. Hansjörg Herr, 2009. "The labour market in a Keynesian economic regime: theoretical debate and empirical findings," Cambridge Journal of Economics, Oxford University Press, vol. 33(5), pages 949-965, September.
    7. Jos� Antonio Ocampo, 2004. "Latin America's Growth and Equity Frustrations During Structural Reforms," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 67-88, Spring.
    8. Martha L. Olney, 1999. "Avoiding Default: The Role Of Credit In The Consumption Collapse Of 1930," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 319-335, February.
    9. Dornbusch, Rudiger, 1990. "Policies to Move from Stabilization to Growth," CEPR Discussion Papers 456, C.E.P.R. Discussion Papers.
    10. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," World Bank Research Observer, World Bank Group, vol. 11(2), pages 151-77, August.
    11. Herr, Hansjörg & Horn, Gustav A, 2012. "Wage policy today," ILO Working Papers 471360, International Labour Organization.
    12. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, October.
    13. Peter Temin, 1994. "The Great Depression," NBER Historical Working Papers 0062, National Bureau of Economic Research, Inc.
    14. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
    15. Rudiger Dornbusch, 1990. "From Stabilization to Growth," NBER Working Papers 3302, National Bureau of Economic Research, Inc.
    16. Peter Temin, 1993. "Transmission of the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 87-102, Spring.
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