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Aggregate Price Shocks and Financial Stability: The United Kingdom 1796-1999

Michael David Bordo (), Michael J. Dueker and David C Wheelock ()

No 8583, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the impact historically of aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of U.K. financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of aggregate price shocks on the index. We find that price level shocks contributed significantly to financial instability during 1820-1931, and that inflation rate shocks contributed to instability during 1972-99. Both the nature of aggregate price shocks and their impact depend on the existing monetary and financial regime, but price shocks historically have been a source of financial instability.

JEL-codes: E31 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
Date: 2001-11
Note: DAE ME
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Journal Article: Aggregate price shocks and financial stability: the United Kingdom 1796-1999 (2003) Downloads
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