IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Aggregate Price Shocks and Financial Stability: The United Kingdom 1796-1999

  • Michael D. Bordo
  • Michael J. Dueker
  • David C. Wheelock

This paper investigates the impact historically of aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of U.K. financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of aggregate price shocks on the index. We find that price level shocks contributed significantly to financial instability during 1820-1931, and that inflation rate shocks contributed to instability during 1972-99. Both the nature of aggregate price shocks and their impact depend on the existing monetary and financial regime, but price shocks historically have been a source of financial instability.

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.

File URL:
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8583.

in new window

Date of creation: Nov 2001
Date of revision:
Publication status: published as Bordo, Michael D., Michael J. Dueker and David C. Wheelock. "Aggregate Price Shocks And Financial Instability: A Historical Analysis," Economic Inquiry, Oct. 2002, 40(4): 521-538
Handle: RePEc:nbr:nberwo:8583
Note: DAE ME
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  2. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  3. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133, December.
  4. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  5. Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2001. "Aggregate price shocks and financial instability: a historical analysis," Working Papers 2000-005, Federal Reserve Bank of St. Louis.
  6. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  7. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
  8. Huffman, Wallace E & Lothian, James R, 1980. "Money in the United Kingdom, 1833-80," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(2), pages 155-74, May.
  9. John H. Boyd & Sangmok Choi & Bruce D. Smith, 1995. "Inflation, financial markets, and capital formation," Working Papers 556, Federal Reserve Bank of Minneapolis.
  10. Willard Long Thorp, 1926. "Business Annals," NBER Books, National Bureau of Economic Research, Inc, number thor26-1, June.
  11. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
  12. Dueker, Michael, 1999. "Conditional Heteroscedasticity in Qualitative Response Models of Time Series: A Gibbs-Sampling Approach to the Bank Prime Rate," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 466-72, October.
  13. Klovland Jan Tore, 1993. "Zooming in on Sauerbeck: Monthly Wholesale Prices in Britain 1845-1890," Explorations in Economic History, Elsevier, vol. 30(2), pages 195-228, April.
  14. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  15. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  16. Barry Eichengreen and Richard S. Grossman., 1994. "Debt Deflation and Financial Instability: Two Historical Explorations," Economics Working Papers 94-231, University of California at Berkeley.
  17. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  18. Larry Neal, 1998. "The financial crisis of 1825 and the restructuring of the British financial system," Review, Federal Reserve Bank of St. Louis, issue May, pages 53-76.
  19. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  20. Chib, Siddhartha, 1993. "Bayes regression with autoregressive errors : A Gibbs sampling approach," Journal of Econometrics, Elsevier, vol. 58(3), pages 275-294, August.
  21. Ben Bemanke & Harold James, 1991. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Chapters, in: Financial Markets and Financial Crises, pages 33-68 National Bureau of Economic Research, Inc.
  22. Willard Long Thorp, 1926. "Prefatory Note," NBER Chapters, in: Business Annals, pages 101-106 National Bureau of Economic Research, Inc.
  23. Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-45, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8583. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.