Economic history

Òscar Jordà, Moritz Schularick, Alan Taylor, 01 September 2015

The risk that asset price bubbles pose for financial stability is still not clear. Drawing on 140 years of data, this column argues that leverage is the critical determinant of crisis damage. When fuelled by credit booms, asset price bubbles are associated with high financial crisis risk; upon collapse, they coincide with weaker growth and slower recoveries. Highly leveraged housing bubbles are the worst case of all.

Jeremiah Dittmar, Skipper Seabold, 19 August 2015

Internet-based communications technologies appear to be integral to the diffusion of social movements today. This column looks back at the Protestant Reformation – the first mass movement to use the new technology of the printing press to drive social change. It argues that diffusion of the Reformation was not driven by technology alone. Competition and openness in the media were also crucial, and delivered their biggest effects in cities where political freedom was most limited.

Timothy W. Guinnane, 13 August 2015

Greece’s crisis has invited comparisons to the 1953 London Debt Agreement, which ended a long period of German default on external debt. This column suggests that looking back, the 1953 agreement was unnecessarily generous given that Germany’s rapid growth lightened the debt repayment burden. Unfortunately for Greece, the motivations driving the 1953 agreement are nearly entirely absent today.

Stefan Gerlach, Peter Kugler, 12 August 2015

Anticipation of future economic policy changes may impact assets such as foreign exchange. This column argues that expectations of a return to gold were an important determinant of the sterling-dollar exchange rate in the early 1920s. The probability of sterling’s return to gold increased from around 15% to over 70% in the second half of 1924, a few months before Churchill announced it in April 1925.

Nicholas Crafts, Alex Klein, 30 July 2015

There is increasing evidence that cities offer externalities that raise labour productivity. This column looks at the contribution of US cities to productivity growth at the turn of last century. The findings show that increased specialisation, promoted by improved transportation, was the key to productivity growth. Today’s policymakers should heed this lesson.

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