Liquidity and Contagion: The Crisis of 1763
The financial crisis that swept across northern Europe in 1763 bears a strong resemblance to more recent episodes of financial distress. The combination of the specific contractual arrange-ments at the time, interlocking credit relationships, and the high leverage of market participants triggered distress sales of assets, leading to a severe liquidity crisis. Hence, the crisis is an early instance of contagion on the asset side of the balance sheet. We highlight the salient features of the 1763 crisis and propose a stylized model of the events. While the financial institutions have changed fundamentally in the intervening 200 or so years, the underlying problems appear to be universal. (JEL: 6621, E44, N23) Copyright (c) 2004 by the European Economic Association.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (2004)
Issue (Month): 6 (December)
|Contact details of provider:|| Web page: http://www.mitpressjournals.org/jeea|
|Order Information:||Web: http://www.mitpressjournals.org/jeea|
When requesting a correction, please mention this item's handle: RePEc:tpr:jeurec:v:2:y:2004:i:6:p:929-968. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites)
If references are entirely missing, you can add them using this form.