| Title | Journal | Date | Author | Abstract | Link |
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| The Legal Origins of Financial Development: Evidence from the Shanghai Concessions | Journal of Finance | 20231201 | Levine, Ross; Lin, Chen; Ma, Chicheng; Xu, Yuchen | The primary challenge to assessing the legal origins view of comparative financial development is identifying exogenous changes in legal systems. We assemble new data on Shanghai's British and French concessions between 1845 and 1936. Two regime changes altered British and French legal jurisdiction over their respective concessions. By examining the changing application of different legal traditions to adjacent neighborhoods within the same city and controlling for military, economic, and political characteristics, we offer new evidence consistent with the legal origins view: the financial development advantage in the British concession widened after Western legal jurisdiction intensified and narrowed after it abated. | View Infographic |
| For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880 | Journal of Finance | 20210601 | Koudijs, Peter; Salisbury, Laura; Sran, Gurpal | We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for newly wedded bankers. We find that banks with managers who married after a law had higher leverage, delayed loss recognition, made more risky and fraudulent loans, and lost more capital and deposits in the Long Depression of 1873 to 1878. These effects were most pronounced for bankers with the largest reduction in liability. We find no evidence that limiting liability increased firm investment at the county level. | View Infographic |
| Real Effects of Supplying Safe Private Money | Journal of Financial Economics | 20240701 | Xu, Chenzi; Yang, He | Privately issued money often bears default risk, which creates transaction frictions when used as a medium of exchange. The late 19th century US provides a unique context to evaluate the real effects of supplying a new type of money that is safe from default. We measure the local change in "monetary" transaction frictions with a market access approach derived from general equilibrium trade theory. Consistent with theories hypothesizing that lowering transaction frictions benefits the traded and inputs-intensive sectors, we find an increase in traded goods production, in the share of manufacturing output and employment, and in innovation. | View Infographic |
| Shattered Housing | Journal of Financial Economics | 20240601 | Happel, Jonas; Karabulut, Yigitcan; Schafer, Larissa; Tuzel, Selale | Do negative housing shocks lead to persistent changes in household attitudes toward housing and homeownership? We use the residential destruction of Germany during World War II (WWII) as a quasi-experiment and exploit the reasonably exogenous region-by-cohort variation in destruction exposure. We find that WWII-experiencing cohorts from high destruction regions are significantly less likely to be homeowners decades later, controlling for regional differences and household characteristics. Underlying this effect are changes in household attitudes toward homeownership that also extend to preferences for housing consumption, with little or no support for risk preferences, income and wealth effects, or supply-side factors. | View Infographic |
| J'Accuse! Antisemitism and Financial Markets in the Time of the Dreyfus Affair | Journal of Financial Economics | 20240401 | Do, Quoc-Anh; Galbiati, Roberto; Marx, Benjamin; Ortiz Serrano, Miguel A. | We study the stock market performance of firms with Jewish board members during the "Dreyfus Affair" in 19th century France. In a context of widespread latent antisemitism, initial accusations made against the Jewish officer Alfred Dreyfus led to short-lived abnormal negative returns for Jewish-connected firms. However, investors betting on these firms earned higher returns during the period corresponding to Dreyfus' rehabilitation, starting with the publication of the famous op-ed J'Accuse! in 1898. Our conceptual framework illustrates how diminishing antisemitic biases among investors might plausibly explain these effects. Our paper provides novel insights on how antisemitism can increase and decrease over short periods of time at the highest socio-economic levels in response to certain events, which in turn can affect firm value in financial markets. | View Infographic |
| Independent Regulators and Financial Stability Evidence from Gubernatorial Election Campaigns in the Progressive Era | Journal of Financial Economics | 20240201 | Del Angel, Marco; Richardson, Gary | Regulatory independence forms a foundation for modern financial systems. The institutions' value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors' supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics' impact on banks and the economy. | View Infographic |
| Reaching for Yield and the Housing Market: Evidence from 18th-Century Amsterdam | Journal of Financial Economics | 20230601 | Korevaar, Matthijs | Do investors reach for yield when interest rates are low and does this behavior affect the housing market? Using the unique setting and data of 18th-century Amsterdam, I show that reach-for-yield behavior of wealthy investors resulted in a large boom and bust in house prices and major changes in rental yields. Exploiting changes in the supply of bonds, I show that investors living off capital income shifted their portfolios towards real estate and other higher-yielding assets when bond yields were low and decreasing. This behavior exacerbated house price volatility and increased housing wealth inequality. | View Infographic |
| The Big Bang: Stock Market Capitalization in the Long Run | Journal of Financial Economics | 20220801 | Kuvshinov, Dmitry; Zimmermann, Kaspar | We study trends and drivers of long-run stock market growth in 17 advanced economies. Between 1870 and the 1980s, stock market capitalization grew in line with GDP. But over subsequent decades, an unprecedented expansion saw market cap to GDP ratios triple and remain persistently high. While most historical stock market growth was driven by issuances, this recent expansion was fueled by rising equity prices. We show that the key driver of this structural break was a profit shift towards listed firms, with listed firm profit shares in both GDP and capital income doubling to reach their highest levels in 146 years. | View Infographic |
| Stocks for the Long Run? Evidence from a Broad Sample of Developed Markets | Journal of Financial Economics | 20220101 | Anarkulova, Aizhan; Cederburg, Scott; O'Doherty, Michael S. | We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivor and easy data biases that plague other work in this area. A bootstrap simulation analysis implies substantial uncertainty about long-horizon stock market outcomes, and we estimate a 12% chance that a diversified investor with a 30-year investment horizon will lose relative to inflation. The results contradict the conventional advice that stocks are safe investments over long holding periods. | View Infographic |
| Global Factor Premiums | Journal of Financial Economics | 20211201 | Baltussen, Guido; Swinkels, Laurens; Van Vliet, Pim | We examine 24 global factor premiums across equity, bond, commodity, and currency markets via replication and out-of-sample evidence between 1800 and 2016. Replication yields ambiguous evidence within a unified testing framework that accounts for p-hacking. Out-of-sample tests reveal strong and robust presence of the large majority of global factor premiums, with limited out-of-sample decay of the premiums. We find global factor premiums to be generally unrelated to market, downside, or macroeconomic risks in the 217 years of data. These results reveal significant global factor premiums that present a challenge to traditional asset pricing theories. | View Infographic |
| Dynastic Control without Ownership: Evidence from Post-war Japan | Journal of Financial Economics | 20211101 | Bennedsen, Morten; Mehrotra, Vikas; Shim, Jungwook; Wiwattanakantang, Yupana | Dynastic-controlled firms are led by founding-family CEOs while the family owns an insignificant share of equity (defined as less than 5%). They represent 7.4% of listed firms in post-war Japan, include well-known firms such as Casio, Suzuki, and Toyota, and are often grouped with widely held firms in the literature. These firms differ in key performance measures from both traditional family firms and non-family firms, and evolve from the former as equity-financed growth dilutes family ownership over time. In turn, the transition from dynastic control to non-family status is driven by a diminution of family legacy and talent. | View Infographic |
| The Telegraph and Modern Banking Development, 1881-1936 | Journal of Financial Economics | 20210801 | Lin, Chen; Ma, Chicheng; Sun, Yuchen; Xu, Yuchen | The telegraph was introduced to China in the late 19th century, a time when China also saw the rise of modern banks. Based on this historical context, this paper documents the importance of information technology in banking development. We construct a data set on the distributions of telegraph stations and banks across 287 prefectures between 1881 and 1936. The results show that the telegraph significantly expanded banks' branch networks in terms of both number and geographic scope. The effect of the telegraph remains robust when we instrument it using proximity to the early military telegraph trunk. | View Infographic |
| Contracting without Contracting Institutions: The Trusted Assistant Loan in 19th Century China | Journal of Financial Economics | 20210601 | Miao, Meng; Niu, Guanjie; Noe, Thomas | This paper documents the emergence of a large bank loan market in the absence of contracting institutions: the trusted assistant loan market in 19th century China. These loans were legally unenforceable, one-shot loans to poor scholars that funded the costs of assuming lucrative administrative appointments offering ample opportunities for corruption. The trusted assistant loan's distinguishing feature was a legally unenforceable stipulation that the borrower incorporate an agent of the creditor into his administrative cadre. We model the enforcement of these loans through expertise leverage and test the model's predictions using data from officials' diaries and a bank loan book. | View Infographic |
| Credit and Social Unrest: Evidence from 1930s China | Journal of Financial Economics | 20201101 | Braggion, Fabio; Manconi, Alberto; Zhu, Haikun | Do credit contractions trigger social unrest? To answer this question, we turn to a natural experiment from 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. We assemble a hand-collected data set of loan contracts between banks and firms, labor unrest episodes, and underground Communist Party penetration. The Silver Purchase shock results in a severe credit contraction, and firms borrowing from banks with a larger exposure to it experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio-political consequences of credit shocks. | View Infographic |
| Limited Liability and Investment: Evidence from Changes in Marital Property Laws in the US South, 1840-1850 | Journal of Financial Economics | 20201001 | Koudijs, Peter; Salisbury, Laura | We study the impact of marital property legislation passed in the US South in the 1840s on households' investment in risky, entrepreneurial projects. These laws protected the assets of newly married women from creditors in a world of virtually unlimited liability. We compare couples married after the passage of a marital property law with couples from the same state who were married before. Consistent with a simple model of household borrowing that trades off agency costs against risk sharing, the effect on investment was heterogeneous. It increased if most household property came from the husband and decreased if most came from the wife. | View Infographic |
| Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation | Review of Financial Studies | 20231201 | Braggion, Fabio; von Meyerinck, Felix; Schaub, Nic | We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations, such as consumption needs, are unlikely to drive our results. | View Infographic |
| Intermediaries and Asset Prices: International Evidence since 1870 | Review of Financial Studies | 20220501 | Baron, Matthew; Muir, Tyler | We study data on commercial banks and securities firms across multiple countries since 1870. Balance sheet expansion of leveraged intermediaries negatively predicts returns of stocks, bonds, currencies, and housing. The predictability is stronger at shorter horizons, is robust to macroeconomic controls, and holds outside distress periods, in contrast to models featuring nonlinearities during distress. Intermediaries in global financial centers predict international equity returns. A new data set on individual stock holdings of Japanese intermediaries since 1955 shows intermediaries affect returns of stocks directly held. Our results suggest a strong universal link between intermediaries and asset returns distinct from macroeconomic channels. | View Infographic |
| Household Inequality, Entrepreneurial Dynamism, and Corporate Financing | Review of Financial Studies | 20210501 | Braggion, Fabio; Dwarkasing, Mintra; Ongena, Steven | Economic theories posit conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism. We investigate the impact of wealth inequality on business dynamics by constructing local measures of household wealth inequality based on financial rents, home equity, and 1880 farmland. We then identify the effect of wealth inequality on entrepreneurship by instrumenting it with land distribution under the 1862 Homestead Act. Wealth inequality decreases firm entry and exit, and the proportion of high-tech businesses across metropolitan statistical areas. Wealth inequality also lowers the supply of public goods, such as education. Growth in income per capita consequently lags. | View Infographic |
| Financial Inclusion, Human Capital, and Wealth Accumulation: Evidence from the Freedman's Savings Bank | Review of Financial Studies | 20201101 | Stein, Luke C. D.; Yannelis, Constantine | This paper studies how access to financial services among a previously unbanked group affects human capital, labor market, and wealth outcomes. We use novel data from the Freedman's Savings Bank--created following the American Civil War to serve free Blacks--employing an instrumental variables strategy exploiting the staggered rollout of bank branches. Families with accounts are more likely to have children in school, be literate, work, and have higher occupational income, business ownership, and real estate wealth. Placebo effects are not present using planned but unbuilt branches, or for Whites, suggesting significant positive effects of financial inclusion. | View Infographic |
| Long-Run Trends in Long-Maturity Real Rates, 1311-2022 | American Economic Review | 20240801 | Rogoff, Kenneth S.; Rossi, Barbara; Schmelzing, Paul | Taking advantage of key recent advances in long-run economic and financial data, we analyze the statistical properties of global long-maturity real interest rates over the past seven centuries. In contrast to existing consensus, we find that real interest rates are in fact trend stationary and exhibit a persistent downward trend since the Renaissance. We investigate structural breaks in real interest rates over time and find that overall the Black Death and the 1557 "Trinity default" appear as consistent inflection points. We further show that demographic and productivity factors do not represent convincing drivers of real interest rates over long spans. | View Infographic |
| Measuring Geopolitical Risk | American Economic Review | 20220401 | Caldara, Dario; Iacoviello, Matteo | We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitical risk foreshadows lower investment and employment and is associated with higher disaster probability and larger downside risks. The adverse consequences of the GPR index are driven by both the threat and the realization of adverse geopolitical events. We complement our aggregate measures with industry- and firm-level indicators of geopolitical risk. Investment drops more in industries that are exposed to aggregate geopolitical risk. Higher firm-level geopolitical risk is associated with lower firm-level investment. | View Infographic |
| The Intergenerational Effects of a Large Wealth Shock: White Southerners after the Civil War | American Economic Review | 20211101 | Ager, Philipp; Boustan, Leah; Eriksson, Katherine | The nullification of slave wealth after the US Civil War (1861-1865) was one of the largest episodes of wealth compression in history. We document that White Southern households that owned more slaves in 1860 lost substantially more wealth by 1870, relative to Southern households that had been equally wealthy before the war. Yet, their sons almost entirely recovered from this wealth shock by 1900, and their grandsons completely converged by 1940. Marriage networks and connections to other elite families may have aided in recovery, whereas transmission of entrepreneurship and skills appear less central. | View Infographic |
| Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools | American Economic Review | 20201001 | Andrabi, Tahir; Das, Jishnu; Khwaja, Asim I.; Ozyurt, Selcuk; Singh, Niharika | We assess whether financing can help private schools, which now account for one-third of primary school enrollment in low- and middle-income countries. Our experiment allocated unconditional cash grants to either one (L) or all (H) private schools in a village. In both arms, enrollment and revenues increased, leading to above- market returns. However, test scores increased only in H schools, accompanied by higher fees, and a greater focus on teachers. We provide a model demonstrating that market forces can provide endogenous incentives to increase quality and increased financial saturation can be used to leverage competition, generating socially desirable outcomes. | View Infographic |
| Factory Productivity and the Concession System of Incorporation in Late Imperial Russia, 1894-1908 | American Economic Review | 20200201 | Gregg, Amanda G. | In Imperial Russia, incorporation required an expensive special concession, yet over 4,000 Russian firms incorporated before 1914. I identify the characteristics of incorporating firms and measure the productivity gains and growth in machine power enjoyed by corporations using newly-constructed factory-level panel data compiled from Russian factory censuses. Factories owned by corporations were larger, more productive, and more mechanized than unincorporated factories. Higher productivity factories were more likely to incorporate and, after incorporating, added machine power and became even more labor productive. Russian firms sought the corporate form's full set of advantages, not just stock markets access, to obtain scarce long-term financing. | View Infographic |
| Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020 | Quarterly Journal of Economics | 20240501 | Derenoncourt, Ellora; Kim, Chi Hyun; Kuhn, Moritz; Schularick, Moritz | The racial wealth gap is the largest of the economic disparities between Black and white Americans, with a white-to-Black per capita wealth ratio of 6 to 1. It is also among the most persistent. In this article, we construct the first continuous series on white-to-Black per capita wealth ratios from 1860 to 2020, drawing on historical census data, early state tax records, and historical waves of the Survey of Consumer Finances, among other sources. Incorporating these data into a parsimonious model of wealth accumulation for each racial group, we document the role played by initial conditions, income growth, savings behavior, and capital returns in the evolution of the gap. Given vastly different starting conditions under slavery, racial wealth convergence would remain a distant scenario, even if wealth-accumulating conditions had been equal across the two groups since Emancipation. Relative to this equal-conditions benchmark, we find that observed convergence has followed an even slower path over the past 150 years, with convergence stalling after 1950. Since the 1980s, the wealth gap has widened again as capital gains have predominantly benefited white households, and convergence via income growth and savings has come to a halt. | View Infographic |
| Reshaping Global Trade: The Immediate and Long-Run Effects of Bank Failures | Quarterly Journal of Economics | 20221101 | Xu, Chenzi | I show that a disruption to the financial sector can reshape the patterns of global trade for decades. I study the first modern global banking crisis originating in London in 1866 and collect archival loan records that link multinational banks headquartered there to their lending abroad. Countries exposed to bank failures in London immediately exported significantly less and did not recover their lost growth relative to unexposed places. Their market shares within each destination also remained significantly lower for four decades. Decomposing the persistent market-share losses shows that they primarily stem from lack of extensive-margin growth, as the financing shock caused importers to source more from new trade partnerships. Exporters producing more substitutable goods, those with little access to alternative forms of credit, and those trading with more distant partners experienced more persistent losses, consistent with the existence of sunk costs and the importance of finance for intermediating trade. | View Infographic |
| Sovereign Bonds since Waterloo | Quarterly Journal of Economics | 20220801 | Meyer, Josefin; Reinhart, Carmen M.; Trebesch, Christoph | This article studies external sovereign bonds as an asset class. We compile a new database of 266,000 monthly prices of foreign-currency government bonds traded in London and New York between 1815 (the Battle of Waterloo) and 2016, covering up to 91 countries. Our main insight is that, as in equity markets, the returns on external sovereign bonds have been sufficiently high to compensate for risk. Real ex post returns average more than 6% annually across two centuries, including default episodes, major wars, and global crises. This represents an excess return of 3%-4% above US or UK government bonds, which is comparable to stocks and outperforms corporate bonds. Central to this finding are the high average coupons offered on external sovereign bonds. The observed returns are hard to reconcile with canonical theoretical models and the degree of credit risk in this market, as measured by historical default and recovery rates. Based on our archive of more than 300 sovereign debt restructurings since 1815, we show that full repudiation is rare; the median creditor loss (haircut) is below 50%. | View Infographic |
| Banking Crises without Panics | Quarterly Journal of Economics | 20210201 | Baron, Matthew; Verner, Emil; Xiong, Wei | We examine historical banking crises through the lens of bank equity declines, which cover a broad sample of episodes of banking distress with and without banking panics. To do this, we construct a new data set on bank equity returns and narrative information on banking panics for 46 countries over the period of 1870 to 2016. We find that even in the absence of panics, large bank equity declines are associated with substantial credit contractions and output gaps. Although panics are an important amplification mechanism, our results indicate that panics are not necessary for banking crises to have severe economic consequences. Furthermore, panics tend to be preceded by large bank equity declines, suggesting that panics are the result, rather than the cause, of earlier bank losses. We use bank equity returns to uncover a number of forgotten historical banking crises and create a banking crisis chronology that distinguishes between bank equity losses and panics. | View Infographic |
| The Effects of Banking Competition on Growth and Financial Stability: Evidence from the National Banking Era | Journal of Political Economy | 20220201 | Carlson, Mark; Correia, Sergio; Luck, Stephan | How does banking competition affect credit provision and growth? How does it affect financial stability? In order to identify the causal effects of banking competition, we exploit a discontinuity in bank capital requirements during the nineteenth-century National Banking Era. We show that banks operating in markets with lower entry barriers extend more credit. The resulting credit expansion, in turn, is associated with additional real economic activity. However, banks in markets with lower entry barriers also take more risk and are more likely to default. Thus, we provide causal evidence that banking competition can cause both growth and financial instability. | View Infographic |
| Discrimination, Managers, and Firm Performance: Evidence from 'Aryanizations' in Nazi Germany | Journal of Political Economy | 20210901 | Huber, Kilian; Lindenthal, Volker; Waldinger, Fabian | Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8% of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses. | View Infographic |
| Income and Wealth Inequality in America, 1949-2016 | Journal of Political Economy | 20200901 | Kuhn, Mortiz; Schularick, Mortiz; Steins, Ulrike I. | This paper introduces a new long-run data set based on archival data from historical waves of the Survey of Consumer Finances. Studying the joint distribution of household income and wealth, we expose the central importance of portfolio composition and asset prices for wealth dynamics in postwar America. Asset prices shift the wealth distribution because of systematic differences in household portfolios along the wealth distribution. Middle-class portfolios are dominated by housing, while rich households predominantly own business equity. Differential changes in equity and house prices shaped wealth dynamics in postwar America and decoupled the income and wealth distribution over extended periods. | View Infographic |
| Private Contracting, Law and Finance | Review of Financial Studies | 20191101 | Acheson, Graeme G.; Campbell, Gareth; Turner, John D. | In the late nineteenth century Britain had almost no mandatory shareholder protections, but had very developed financial markets. We argue that private contracting between shareholders and corporations meant that the absence of statutory protections was immaterial. Using approximately 500 articles of association from before 1900, we code the protections offered to shareholders in these private contracts. We find that firms voluntarily offered shareholders many of the protections that were subsequently included in statutory corporate law. We also find that companies offering better protection to shareholders had less concentrated ownership. | View Infographic |
| Why Did Shareholder Liability Disappear? | Journal of Financial Economics | 20240201 | Bogle, David A.; Campbell, Gareth; Coyle, Christopher; Turner, John D. | Why did shareholder liability disappear? We address this question by looking at its use by British insurance companies until its complete disappearance. We explore three possible explanations for its demise: (1) regulation and government-provided policyholder protection meant that it was no longer required; (2) it had become de facto limited; and (3) shareholders saw an opportunity to expunge something they disliked when insurance companies grew in size. Using hand-collected archival data, our findings suggest investors attached a risk premium to companies with shareholder liability, and it was phased out as insurance companies expanded, which meant that they were better able to pool risks. | View Infographic |
| The Ends of 27 Big Depressions | American Economic Review | 20240101 | Ellison, Martin; Lee, Sang Seok; O'Rourke, Kevin Hjortshoj | How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do so for a sample of 27 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on well-defined dates, inflationary expectations clearly rose in the wake of departure. Instrumental variable, difference-in-difference, and synthetic matching techniques suggest that the relationship is causal. | View Infographic |
| Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany | Journal of Political Economy | 20240601 | Papadia, Andrea; Schioppa, Claudio A. | We investigate how internal distribution motives can affect the implementation of an important macroeconomic policy: capital controls. To do this, we study one of history's largest debt repatriations, which took place under strict capital controls in 1930s Germany, providing a wealth of quantitative and historical evidence. We show that the authorities kept private repatriations under strict control, thus avoiding detrimental macroeconomic effects, while allowing discretionary repatriations in order to reap internal political benefits. We formalize this mechanism in a model in which elite capture can affect optimal debt repatriations and the management of official reserves under capital controls. | View Infographic |
| Rejected Stock Exchange Applicants | Journal of Financial Economics | 20210201 | Fjesme, Sturla L.; Galpin, Neal E.; Moore, Lyndon | We examine listing applications by firms to the London Stock Exchange between 1891 and 1911. The exchange rejected 82 (13.1%) of the 628 applicants to its main board. Accepted applicants were twice as likely to pay dividends (and to pay twice as much) and had longer firm lives than rejected applicants. Rejected applicants were more likely to file for liquidation than successful applicants. These results remain even after we control for the primary benefits of the listing itself: liquidity and future capital inflows. In this era, the London Stock Exchange could screen applicants for listing. | View Infographic |
| Did Monetary Policy Matter? Narrative Evidence from the Classical Gold Standard | Explorations in Economic History | 20180401 | Lennard, Jason | This paper investigates the causal effects of monetary policy on the British economy during the classical gold standard. Based on the narrative identification approach, I find that following a one percentage point monetary tightening, unemployment rose by 0.9 percentage points, while inflation fell by 3.1 percentage points. In addition, monetary policy shocks accounted for a third of macroeconomic volatility. | View Infographic |
| Did Monetary Policy Matter? Narrative Evidence from the Classical Gold Standard | Explorations in Economic History | 20180401 | Lennard, Jason | This paper investigates the causal effects of monetary policy on the British economy during the classical gold standard. Based on the narrative identification approach, I find that following a one percentage point monetary tightening, unemployment rose by 0.9 percentage points, while inflation fell by 3.1 percentage points. In addition, monetary policy shocks accounted for a third of macroeconomic volatility. | View Infographic |
| Sticky Wages and the Great Depression: Evidence from the United Kingdom | European Review of Economic History | 20230501 | Lennard, Jason | How sticky were wages during the Great Depression? Although classic accounts emphasise the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages changed infrequently but that wage cuts were more common than wage rises on average. Nominal wage adjustment fluctuated over time and by state, so that in 1931 amid falling output and prices more than one-third of workers received wage cuts. | View Infographic |
| Dating Business Cycles in the United Kingdom, 1700-2010 | Economic History Review | 20231101 | Broadberry, Stephen; Chadha, Jagjit S.; Lennard, Jason; Thomas, Ryland | This paper constructs a new chronology of the business cycle in the United Kingdom from 1700 on an annual basis and from 1920 on a quarterly basis to 2010. The new chronology points to several observations about the business cycle. First, the cycle has significantly increased in duration and amplitude over time. Second, contractions have become less frequent but are as persistent and costly as at other times in history. Third, the typical recession has been tick-shaped with a short contraction and longer recovery. Finally, the major causes of downturns have been sectoral shocks, financial crises, and wars. | View Infographic |
| Measuring Inflation Expectations in Interwar Britain | Economic History Review | 20230801 | Lennard, Jason; Meinecke, Finn; Solomou, Solomos | What caused the recovery from the British Great Depression? A leading explanation--the 'expectations channel'--suggests that a shift in expected inflation lowered real interest rates and stimulated consumption and investment. However, few studies have measured, or tested the economic consequences of, inflation expectations. In this paper, we collect high-frequency information from primary and secondary sources to measure expected inflation in the United Kingdom between the wars. A high-frequency vector autoregression suggests that inflation expectations were an important source of the early stages of economic recovery in interwar Britain. | View Infographic |
