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Crises in the Global Economy from Tulips to Today: Contagion and Consequences

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  • Larry Neal
  • Marc Weidenmier

Abstract

This paper examines the historical record of the financial crises that have often accompanied surges of globalization in the past. The issue of contagion, the spread of financial turbulence from the crisis center to its trading partners, is confronted with historical and statistical evidence on the causes and consequences of well-known crises. In general, contagion seems often confused with prior interdependence, and crises are less widespread and shorter in duration than anecdotal evidence would indicate. Special attention is given to the gold standard period of 1880-1913, which we find useful to divide into the initial period of deflation, 1880-1896, and the following period of mild inflation, 1897-1913. We find evidence of changes in the pattern of 'contagion' from core to periphery countries between the two periods, but in both periods apparent contagions can more readily be interpreted as responses to common shocks. Lessons for the present period can only be tentative, but the similarities in learning experiences are striking.

Suggested Citation

  • Larry Neal & Marc Weidenmier, 2002. "Crises in the Global Economy from Tulips to Today: Contagion and Consequences," NBER Working Papers 9147, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9147
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    Cited by:

    1. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, August.
    2. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2004. "Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 75-108, June.
    3. Marc Flandreau & Juan H. Flores & Norbert Gaillard & Sebastián Nieto-Parra, 2010. "The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815-2007," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 53-92, National Bureau of Economic Research, Inc.
    4. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall.
    5. Raj Aggarwal, 2004. "Persistent Puzzles in International Finance and Economics," The Economic and Social Review, Economic and Social Studies, vol. 35(3), pages 241-250.
    6. Zhou, Wei-Xing & Sornette, Didier, 2003. "Evidence of a worldwide stock market log-periodic anti-bubble since mid-2000," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 330(3), pages 543-583.
    7. Esteves, Rui Pedro & Reis, Jaime & Ferramosca, Fabiano, 2009. "Market Integration in the Golden Periphery. The Lisbon/London Exchange, 1854-1891," Explorations in Economic History, Elsevier, vol. 46(3), pages 324-345, July.
    8. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    9. Edgar Demetrio Tovar, 2011. "Globalización financiera y sus efectos sobre el desarrollo financiero," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 80-127, December.

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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