Working Paper: CEPR ID: DP9670
Authors: Olivier Accominotti; Barry Eichengreen
Abstract: We present new data documenting European capital issues in major financial centers from 1919 to 1932. Push factors (conditions in international capital markets) perform better than pull factors (conditions in the borrowing countries) in explaining the surge and reversal in capital flows. In particular, the sharp increase in stock market volatility in the major financial centers at the end of the 1920s figured importantly in the decline in foreign lending. We draw parallels with Europe today.
Keywords: capital flows; Europe; Great Depression; sudden stop
JEL Codes: F21; F32; F34; N13; N24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| push factors (F22) | capital flow dynamics (F32) |
| stock market volatility (G17) | decline in foreign lending (F65) |
| severity of previous foreign borrowing (F34) | capital flow reversal in 1931 (F32) |
| public debt levels (H63) | magnitude of capital flow reversal (F32) |