Working Paper: NBER ID: w19580
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; economic history; financial crises; Europe; interwar period
JEL Codes: F0; F4; N0; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| push factors (F22) | capital flows (F32) |
| stock market volatility (G17) | foreign lending to European countries (F34) |
| pull factors (F22) | capital flows (F32) |
| public debt (H63) | capital flow reversal (F32) |
| foreign borrowing during surge years (F34) | capital flow reversal (F32) |
| external market conditions (L19) | vulnerability to sudden stops and reversals (F65) |