Stories of the Twentieth Century for the Twenty-First

Pierre-Olivier Gourinchas and Maurice Obstfeld

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage. Those emerging economies that avoided leverage booms during the 2000s also were most likely to avoid the worst effects of the twenty-first century's first global crisis. A discrete-choice panel analysis using 1973-2010 data suggests that domestic credit expansion and real currency appreciation have been the most robust and signicant predictors of financial crises, regardless of whether a country is emerging or advanced. For emerging economies, however, higher foreign exchange reserves predict a sharply reduced probability of a subsequent crisis.

Keywords: Arts and Humanities; Business; Social and Behavioral Sciences; financial crises; global crisis; domestic credit expansion; real currency appreciation (search for similar items in EconPapers)
Date: 2011-07-01
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Stories of the Twentieth Century for the Twenty-First (2012)
Working Paper: Stories of the Twentieth Century for the Twenty-First (2011)
Working Paper: Stories of the Twentieth Century for the Twenty-First (2011)
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