Working Paper: NBER ID: w11319
Authors: William O. Brown; Richard C.K. Burdekin; Marc D. Weidenmier
Abstract: Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a greater-than-50% decline in volatility from the end of the Napoleonic wars in 1815 until the First World War. News events and macroeconomic variables cannot account for this extended period of reduced volatility. Underlying political stability under Pax Britannica seems to be a more likely explanation, however.
Keywords: No keywords provided
JEL Codes: JE6; H3; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pax Britannica (F54) | reduced financial volatility (G19) |
| political stability (P26) | reduced financial volatility (G19) |
| end of Napoleonic Wars (N43) | reduced financial volatility (G19) |
| Pax Britannica (F54) | higher average consol returns (G19) |