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Using Markets to Measure Pre-War Threat Assessments: The Nordic Countries Facing World War II

Author

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  • Waldenström, Daniel

    () (Research Institute of Industrial Economics)

  • Frey, Bruno S.

    (University of Zürich)

Abstract

Nordic historians have asserted for a long time that in the Nordic countries only few people, if any, perceived increased threats of war prior to the World War II outbreak. This would explain, and possibly excuse, why their governments did not mobilize their armies until it was too late. This paper questions this established notion by deriving new estimates of widely held war threat assessments from the fluctuations of sovereign market yields collected from all Nordic bond markets at this period. Our results show that the Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings hence question some, but not all, of the standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacit views and opinions of large groups of people in the past.

Suggested Citation

  • Waldenström, Daniel & Frey, Bruno S., 2006. "Using Markets to Measure Pre-War Threat Assessments: The Nordic Countries Facing World War II," Working Paper Series 676, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0676
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    References listed on IDEAS

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    Cited by:

    1. He, Yinghua & Nielsson, Ulf & Wang, Yonglei, 2017. "Hurting without hitting: The economic cost of political tension," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 106-124.
    2. Waldenström, Daniel, 2006. "Why Does Sovereign Risk Differ for Domestic and Foreign Investors? Evidence from Scandinavia, 1938­­–1948," Working Paper Series 677, Research Institute of Industrial Economics.

    More about this item

    Keywords

    Structural breaks; Sovereign debt; Capital Markets; Historiography; Cliometrics; World War II;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N01 - Economic History - - General - - - Development of the Discipline: Historiographical; Sources and Methods
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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