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Crises in the Global Economy from Tulips to Today: Contagion and Consequences

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  • Larry Neal
  • Marc Weidenmier

Abstract

This paper examines the historical record of the financial crises that have often accompanied surges of globalization in the past. The issue of contagion, the spread of financial turbulence from the crisis center to its trading partners, is confronted with historical and statistical evidence on the causes and consequences of well-known crises. In general, contagion seems often confused with prior interdependence, and crises are less widespread and shorter in duration than anecdotal evidence would indicate. Special attention is given to the gold standard period of 1880-1913, which we find useful to divide into the initial period of deflation, 1880-1896, and the following period of mild inflation, 1897-1913. We find evidence of changes in the pattern of 'contagion' from core to periphery countries between the two periods, but in both periods apparent contagions can more readily be interpreted as responses to common shocks. Lessons for the present period can only be tentative, but the similarities in learning experiences are striking.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9147.

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Date of creation: Sep 2002
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Publication status: published as Bordo, Michael D., Alan M. Taylor, and Jeffrey G. Williamson (eds.) Globalization in Historical Perspective. Chicago and London: University of Chicago Press, 2003.
Handle: RePEc:nbr:nberwo:9147

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