Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Is the crisis problem growing more severe?

Is the crisis problem growing more severe? SUMMARYFinancial crises Lessons from the last 120 yearsThe crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyses a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivalled only by the crisis‐ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporations to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.— Michael Bordo, Barry Eichengreen, Daniela Klingebiel and Maria Soledad Martinez‐Peria http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economic Policy Oxford University Press

Is the crisis problem growing more severe?

Download PDF
31 pages

Loading next page...
 
/lp/oxford-university-press/is-the-crisis-problem-growing-more-severe-2fzLkzZbJw

References (67)

Publisher
Oxford University Press
Copyright
© CEPR, CES, MSH, 2001
ISSN
0266-4658
eISSN
1468-0327
DOI
10.1111/1468-0327.00070
Publisher site
See Article on Publisher Site

Abstract

SUMMARYFinancial crises Lessons from the last 120 yearsThe crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyses a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivalled only by the crisis‐ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporations to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.— Michael Bordo, Barry Eichengreen, Daniela Klingebiel and Maria Soledad Martinez‐Peria

Journal

Economic Policy – Oxford University Press

Published: Apr 1, 2001

There are no references for this article.