Working Paper: NBER ID: w9147
Authors: 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.
Keywords: financial crises; globalization; contagion; historical analysis
JEL Codes: G15; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| common shocks (E32) | contagion (F65) |
| financial crises (G01) | contagion (F65) |
| financial crises (G01) | evolution of financial systems (N20) |
| learning from past crises (H12) | current financial practices (F32) |