Great Crashes in History: Have They Lessons for Today?
Crashes in asset markets have been common throughout history, while financial crises, defined as crises in the banking system, have in some countries and periods been as common, and in others much more rare. This article examines historical attitudes to those events, and looks at some of the events themselves. It is concluded first, that crashes need not inevitably be followed by crises; second, that crashes without crises do not have serious effects on the economy; and third, that there is a policy instrument, the lender of last resort, to prevent financial crises from occurring even should there be a substantial preceding fall in asset markets. These lessons from history, so it is argued, hold for recent events in South-east Asia and, indeed, apply generally to any economy. The present can still learn from the past. Copyright 1999 by Oxford University Press.
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