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Using Markets to Measure Pre-War Threat Assessments: The Nordic Countries facing World War II

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Author Info
Daniel Waldenström
Bruno S. Frey

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Abstract

Nordic historians have asserted for a long time that in the Nordic countries only few people, if any, perceived increased threats of war prior to the World War II outbreak. This would explain, and possibly excuse, why their governments did not mobilize their armies until it was too late. This paper questions this established notion by deriving new estimates of widely held war threat assessments from the fluctuations of sovereign market yields collected from all Nordic bond markets at this period. Our results show that the Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings hence question some, but not all, of the standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacit views and opinions of large groups of people in the past.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp308.

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Date of creation: Nov 2006
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Handle: RePEc:zur:iewwpx:308

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Related research
Keywords: Structural breaks Sovereign debt Capital markets Historiography Cliometrics World War II

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
N01 - Economic History - - General - - - Development of the Discipline: Historiographical; Sources and Methods
N44 - Economic History - - Government, War, Law, and Regulation - - - Europe: 1913-

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  1. Brown, William O, Jr & Burdekin, Richard C K, 2002. "German Debt Traded in London during the Second World War: A British Perspective on Hitler," Economica, London School of Economics and Political Science, vol. 69(276), pages 655-69, November. [Downloadable!] (restricted)
  2. Willard, Kristen L & Guinnane, Timothy W & Rosen, Harvey S, 1996. "Turning Points in the Civil War: Views from the Greenback Market," American Economic Review, American Economic Association, vol. 86(4), pages 1001-18, September. [Downloadable!] (restricted)
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  3. Frey, Bruno S & Kucher, Marcel, 2001. "Wars and Markets: How Bond Values Reflect the Second World War," Economica, London School of Economics and Political Science, vol. 68(271), pages 317-333, August. [Downloadable!] (restricted)
  4. Pierre Perron, 2005. "Dealing with Structural Breaks," Boston University - Department of Economics - Working Papers Series WP2005-017, Boston University - Department of Economics. [Downloadable!]
  5. Oosterlinck, Kim, 2003. "The bond market and the legitimacy of Vichy France," Explorations in Economic History, Elsevier, vol. 40(3), pages 326-344, July. [Downloadable!] (restricted)
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  6. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
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  7. Bruno S. Frey & Marcel Kucher, . "History as Reflected in Capital Markets: The Case of World War II," IEW - Working Papers iewwp002, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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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. Waldenström, Daniel, 2006. "Why Does Sovereign Risk Differ for Domestic and Foreign Investors? Evidence from Scandinavia, 1938­­–1948," Working Paper Series 677, Research Institute of Industrial Economics. [Downloadable!]
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