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A brief history of the 1987 stock market crash with a discussion of the Federal Reserve response

Author

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  • Mark A. Carlson

Abstract

The 1987 stock market crash was a major systemic shock. Not only did the prices of many financial assets tumble, but market functioning was severely impaired. This paper reviews the events surrounding the crash and discusses the response of the Federal Reserve, which responded in a number of ways to support the operation of financial markets, including the provision of liquidity, in a highly visible fashion.

Suggested Citation

  • Mark A. Carlson, 2006. "A brief history of the 1987 stock market crash with a discussion of the Federal Reserve response," Finance and Economics Discussion Series 2007-13, Board of Governors of the Federal Reserve System (U.S.), revised 2006.
  • Handle: RePEc:fip:fedgfe:2007-13
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Black Monday: 30 Years After
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2017-10-02 17:20:28

    Citations

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    Cited by:

    1. Rama Cont & Lakshithe Wagalath, 2012. "Fire Sales Forensics: Measuring Endogenous Risk," Working Papers hal-00697224, HAL.
    2. repec:fip:fedhep:y:2013:i:qii:p:30-46:n:vol.37no.2 is not listed on IDEAS
    3. Terry Bossomaier & Lionel Barnett & Adam Steen & Mike Harré & Steve d'Alessandro & Rod Duncan, 2018. "Information flow around stock market collapse," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(S1), pages 45-58, November.
    4. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2016. "Gold, oil, and stocks: Dynamic correlations," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 186-201.
    5. Olivier Coibion & Yuriy Gorodnichenko, 2012. "Why Are Target Interest Rate Changes So Persistent?," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 126-162, October.
    6. David A. Marshall & Robert Steigerwald, 2013. "The role of time-critical liquidity in financial markets," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 37(Q II), pages 30-46.
    7. Chaudhry, Neeru & Au Yong, Hue Hwa & Veld, Chris, 2017. "Tax avoidance in response to a decline in the funding status of defined benefit pension plans," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 48(C), pages 99-116.
    8. Didier Sornette & Peter Cauwels & Georgi Smilyanov, 2017. "Can We Use Volatility to Diagnose Financial Bubbles? Lessons from 40 Historical Bubbles," Swiss Finance Institute Research Paper Series 17-27, Swiss Finance Institute.
    9. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2010. "U.S. foreign-exchange-market intervention during the Volcker-Greenspan era," Working Papers (Old Series) 1007, Federal Reserve Bank of Cleveland, revised 2010.
    10. Dong, Xinyue & Ma, Rong & Li, Honggang, 2019. "Stock index pegging and extreme markets," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 13-21.
    11. Barunik, J. & Vosvrda, M., 2009. "Can a stochastic cusp catastrophe model explain stock market crashes?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1824-1836, October.
    12. Jeffrey Wurgler, 2010. "On the Economic Consequences of Index-Linked Investing," NBER Working Papers 16376, National Bureau of Economic Research, Inc.
    13. David S. Bates, 2016. "How Crashes Develop: Intradaily Volatility and Crash Evolution," NBER Working Papers 22028, National Bureau of Economic Research, Inc.

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