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Great Crashes in History: Have They Lessons for Today?

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  • Wood, Geoffrey

Abstract

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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  • Wood, Geoffrey, 1999. "Great Crashes in History: Have They Lessons for Today?," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 98-109, Autumn.
  • Handle: RePEc:oup:oxford:v:15:y:1999:i:3:p:98-109
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    Cited by:

    1. Asli Demirgüç-Kunt & Enrica Detragiache, 2005. "Cross-Country Empirical Studies of Systemic Bank Distress: A Survey," National Institute Economic Review, National Institute of Economic and Social Research, vol. 192(1), pages 68-83, April.
    2. Claudio Borio & Craig Furfine & Philip Lowe, 2001. "Procyclicality of the financial system and financial stability: issues and policy options," BIS Papers chapters,in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 1-57 Bank for International Settlements.
    3. Moser, Thomas, 2003. "What Is International Financial Contagion?," International Finance, Wiley Blackwell, vol. 6(2), pages 157-178, Summer.
    4. Barry Eichengreen and Carlos Arteta., 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research (CIDER) Working Papers C00-115, University of California at Berkeley.
    5. Øyvind Eitrheim & Bjarne Gulbrandsen, 2001. "A model based approach to analysing financial stability," BIS Papers chapters,in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 311-330 Bank for International Settlements.
    6. Andrew G Haldane & Glenn Hoggarth & Victoria Saporta, 2001. "Assessing financial system stability, efficiency and structure at the Bank of England," BIS Papers chapters,in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 138-159 Bank for International Settlements.

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