The mother of all sudden stops - lessons from the 1930s
I really never understood why most economists study so little economic history as they tend to do, but it is a fact that most professional economists are quite uneducated when it comes to economic history. My contribution to changing that is sharing research on economic history with my readers. So take a look at this new paper by Olivier Accominotti and Barry Eichengreen on "The Mother of All Sudden Stops: Capital Flows and Reversals in Europe, 1919-1932". Here is the 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.A couple of days ago I argued that David Laidler should be awarded the Nobel Prize in economics, but if it is award to Barry Eichengreen for his contribution to "the understanding of economic history" I think it would be well-deserved!