IDEAS home Printed from https://ideas.repec.org/p/fes/wpaper/wpaper24.html
   My bibliography  Save this paper

Previous financial crises leading to stagnation – selected case studies

Author

Listed:
  • Nina Dodig

    (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE))

  • Hansjorg Herr

    (Berlin School of Economics and Law, and Institute for International Political Economy Berlin (IPE))

Abstract

This paper analyses several severe financial crises observed in the history of capitalism which led to a longer period of stagnation or low growth. Comparative case studies of the Great Depression, the Latin American debt crisis of the 1980s and the Japanese crisis of the 1990s and 2000s are presented. The following questions are asked: What triggered big financial crises? Which factors intensified financial crises? And most importantly, which factors prevented the return of prosperity for a long time? The main conclusion is that stagnation after big financial crises becomes likely when the balance sheets of economic units are not quickly cleaned, when the nominal wage anchor breaks, and when there is no big and longer growth stimulus by the state. Some tentative conclusions for the subprime financial crisis and the Great Recession are drawn.

Suggested Citation

  • Nina Dodig & Hansjorg Herr, 2014. "Previous financial crises leading to stagnation – selected case studies," Working papers wpaper24, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  • Handle: RePEc:fes:wpaper:wpaper24
    as

    Download full text from publisher

    File URL: http://fessud.eu/wp-content/uploads/2013/04/FESSUD-Working-Paper-Previous-financial-crises-leading-to-stagnation-13022014-working-paper-24.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stanley Fischer & Ratna Sahay & Carlos A. Végh, 2002. "Modern Hyper- and High Inflations," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 837-880, September.
    2. Holt, Charles F., 1977. "Who benefited from the prosperity of the twenties?," Explorations in Economic History, Elsevier, vol. 14(3), pages 277-289, July.
    3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    4. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
    5. repec:ilo:ilowps:471360 is not listed on IDEAS
    6. Manuel Ramos -Francia & Ana María Aguilar-Argaez & Santiago García-Verdú & Gabriel Cuadra-García, 2013. "Heading into Trouble: A Comparison of the Latin American Crises and the Euro Area’s Current Crisis," Monetaria, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 87-165, January-j.
    7. Simon Kuznets, 1937. "Introduction to "National Income and Capital Formation, 1919-1935"," NBER Chapters,in: National Income and Capital Formation, 1919-1935, pages 1-2 National Bureau of Economic Research, Inc.
    8. José Antonio Ocampo, 2004. "Latin America's Growth and Equity Frustrations During Structural Reforms," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 67-88, Spring.
    9. Simon Kuznets, 1937. "Appendices to "National Income and Capital Formation, 1919-1935"," NBER Chapters,in: National Income and Capital Formation, 1919-1935, pages 61-90 National Bureau of Economic Research, Inc.
    10. Martha L. Olney, 1999. "Avoiding Default: The Role of Credit in the Consumption Collapse of 1930," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 319-335.
    11. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    12. Palma, J. G., 2012. "How the full opening of the capital account to highly liquid financial markets led Latin America to two and a half cycles of ‘mania, panic and crash’," Cambridge Working Papers in Economics 1201, Faculty of Economics, University of Cambridge.
    13. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, vol. 52(04), pages 757-784, December.
    14. Eckhard Hein & Engelbert Stockhammer (ed.), 2011. "A Modern Guide to Keynesian Macroeconomics and Economic Policies," Books, Edward Elgar Publishing, number 13962.
    15. Dighe, Ranjit S. & Schmitt, Elizabeth Dunne, 2010. "Did U.S. wages become stickier between the world wars?," The North American Journal of Economics and Finance, Elsevier, vol. 21(2), pages 165-181, August.
    16. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," World Bank Research Observer, World Bank Group, vol. 11(2), pages 151-177, August.
    17. Milka Kazandziska, 2015. "Macroeconomic policy regime in Poland," Working Papers 59/2015, Institute of Economic Research, revised Apr 2015.
    18. Hansjörg Herr, 2009. "The labour market in a Keynesian economic regime: theoretical debate and empirical findings," Cambridge Journal of Economics, Oxford University Press, vol. 33(5), pages 949-965, September.
    19. Peter Temin, 1993. "Transmission of the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 87-102, Spring.
    20. Dornbusch, Rudiger, 1990. "Policies to Move from Stabilization to Growth," CEPR Discussion Papers 456, C.E.P.R. Discussion Papers.
    21. Rudiger Dornbusch, 1990. "From Stabilization to Growth," NBER Working Papers 3302, National Bureau of Economic Research, Inc.
    22. repec:cml:moneta:v:xxxv:y:2013:i:1:p:87-165 is not listed on IDEAS
    23. Peter Temin, 1994. "The Great Depression," NBER Historical Working Papers 0062, National Bureau of Economic Research, Inc.
    24. Simon Kuznets, 1937. "National Income and Capital Formation, 1919-1935," NBER Books, National Bureau of Economic Research, Inc, number kuzn37-1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eckhard Hein, 2015. "Causes and Consequences of the Financial Crisis and the Implications for a More Resilient Financial and Economic System: Synthesis of FESSUD Work Package 3," Working papers wpaper128, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    2. Nina Dodig & Hansjörg Herr, 2015. "Current Account Imbalances in the EMU: An Assessment of Official Policy Responses," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(2), pages 193-216, June.
    3. Dodig, Nina & Herr, Hansjörg, 2015. "Theories of finance and financial crisis: Lessons for the Great Recession," IPE Working Papers 48/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Nina Dodig & Hansjorg Herr, 2015. "EU policies addressing current account imbalances in the EMU: an assessment," Working papers wpaper74, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Eckhard Hein & Daniel Detzer, 2014. "Coping with imbalances in the Euro area: Policy alternatives addressing divergences and disparities between member countries," Working papers wpaper63, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    6. Hein, Eckhard, 2016. "Causes and consequences of the financial crisis and the implications for a more resilient financial and economic system," IPE Working Papers 61/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    Keywords

    financial crises; stagnation; deflation; lost decade; Great Depression; Latin American debt crisis; Japanese crisis; Great Recession;

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G01 - Financial Economics - - General - - - Financial Crises
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fes:wpaper:wpaper24. 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: (Helen Evans). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.