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This Time Is Different: Eight Centuries of Financial Folly Page 38
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definition of, xxxix
leverage ratios, 214
liability dollarization, 109b, 191
liberalization, financial: banking crises associated with, 155–56, 206, 270–71
as precursor to crises, 217, 270–71
Liberia, banking crises in, 372t
liquidation, in bank runs, 144
liquidity crises, 59–61, 90
Lithuania, banking crises in, 372t
London, in Latin American capital markets, 93b–94b
long-term debt: in bank runs, 144–45
domestic public debt as, 105–6, 106f
low-income countries, definition of, 394n3. See also emerging market(s)
Lucas critique, 287
Maastricht Treaty, 21, 121
Macedonia, banking crises in, 372t
macroeconomic stability, debt intolerance and, 30–32
macroeconomic time series, 295–326
macroeconomic volatility, decline in, 256
Madagascar, banking crises in, 372t
Malaysia: banking crises in, 373t
capital flow bonanzas in, 402n18
duration of crises in, 235
graduation in, 287
housing prices in, 159
inflation crises in, 182
Mali, banking crises in, 373t
Manias, Panics and Crashes (Kindleberger), xxvii
Mary Poppins (movie), xl
maturity structure: banks’ role in, 144
of domestic public debt, 105–6, 106f, 127, 400n11
Mauritania, banking crises in, 373t
Mauritius: banking crises in, 373t
as default virgin, 44, 258
financial turbulence index for, 258
media coverage, of U.S. subprime crisis, 199
Merrill Lynch, 210
metallic currency: data on, 37
debasement of, 6, 7t, 174–79
seignorage revenues from, 174. See also silver currency
Mexico: banking crises in, 206, 373–75t
Brady bonds in, 84b
contagion of crises in, 246
debt crisis of 1990s and early 2000s in, 19
de-dollarization in, 193–96, 194f
domestic debt in, foreign currency–linked, 64, 106–8, 108b–109b
domestic default by, 13–14, 64, 108b–109b, 193–95, 256
duration of crises in, 235, 237
exchange rate crises in, 190
external debt to GDP ratios in, 22
external default by, 12, 22, 23t, 98, 109b
financial turbulence index for, 256
graduation in, 284
sovereign risk rating of, 287
Middle Ages, odious debt in, 63
middle-income countries: definition of, 394n3
external defaults in, 22, 23t
military force, in repayment of debts, 54–55
mining, in Latin America, 93b
models: of banking crises, 146
of domestic public debt, 110
Ricardian, of debt, 65
monetary base (base money): definition of, 119
domestic public debt and, 119, 125–27
monetary policy: currency debasement in, 177
and financial contagion, 199
after graduation, 283
and housing prices, 213
after inflation crises and currency crashes, 191
recommendations on, 287–90
in Second Great Contraction, 238
shocks in, 146. See also exchange rate(s) interest rates
moral hazard, of international lending, 62
Morocco: banking crises in, 375t
Brady bonds in, 84b
debt reversals in, 84b
external default by, 92
mortgage loans: de-dollarization of, 195
defaults on, in financial turbulence index, 251
international investment in, 242–45
securitization of, 208, 210, 213, 404n13
toxic, 251
Mozambique, banking crises in, 375t
multiple equilibria, xlii–xliii, 60–61, 67, 144
Myanmar, banking crises in, 375t
NAFTA, 19
Napoleonic Wars: currency debasement during, 177, 178f
exchange rates during, 189, 190f
external defaults during, 68, 73, 92
external defaults after, 92
narrative approach, xxvii
national accounts, data on, 39–40
national treasures, 52, 397n1
Nepal, banking crises in, 375t
Netherlands, banking crises in, 171, 375t
Newfoundland: external default by, 81, 81b–83b
loss of sovereignty, 54, 81. See also Canada
New World. See colonies
New Zealand: banking crises in, 376t
current account balance in, 244
housing prices in, 244
inflation crises in, 185
trade during global crises, 264
Nicaragua: banking crises in, 376t
external default by, 98
U.S. intervention in, 83b
Niger, banking crises in, 376t
Nigeria: banking crises in, 376t
Brady bonds in, 84b
external default by, 92
noise-to-signal ratios, 408n3
nonperforming loans, as indicators of banking crises, 9–10
Nordic countries: banking crises in, 206
countercyclical fiscal policy in, 224–25
North America: banking crises in, 147, 150t, 153t, 154t
data coverage of, 43, 46t
domestic public debt in, 104f
external default in, 100t
inflation crises after 1800 in, 185, 187t. See also Canada; United States
North American Free Trade Agreement (NAFTA), 19
Northern Rock bank, xl–xli
Norway: bailout costs in, 164
banking crises in, 159, 164, 226, 376–77t
domestic debt in, 126
duration of crises in, 235
housing prices in, 402n25
inflation crises in, 185
Oceania: banking crises in, 147, 150t, 153t, 154t
data coverage of, 43, 46t
domestic public debt in, 104f
external default in, 100t
inflation crises after 1800 in, 185, 187t. See also Australia; New Zealand
odious debt, 63–64
oil: nationalization of, 58
price shocks in, 206, 248, 255
surpluses of, 17
OPEC. See Organization of Petroleum Exporting Countries
Organization of Petroleum Exporting Countries (OPEC), 17, 58
output: in aftermath of crises, 224
data on, 307–10t
in Great Depression versus postwar crises, 234–37, 234f
Pakistan, de-dollarization in, 194f, 195–96
Panama: banking crises in, 377t
debt reversals in, 84b
inflation crises in, 185
panic of 1907: banking crises in, 205
contagion of, 242
in financial turbulence index, 255
paper currency: debasement of, 175
inflation after advent of, 35, 75–76, 181
inflation before advent of, 5
transition to, 175, 179
Papua New Guinea, banking crises in, 377t
Paraguay, banking crises in, 377–78t
partial default, 61–63
amount repaid in, 61–62
through inflation, 44, 75
reschedulings as form of, 62, 90–92
serial, 15
third parties in, 62, 397n16
and trade, 62, 397n16
peak-to-trough calculations, 405n2
Peru: banking crises in, 204, 378t
Brady bonds in, 84b, 85b
de-dollarization in, 196, 403n10
domestic debt in, 104–5
external default by, 94, 98
Philippines: banking crises in, 226, 378t
Brady bonds in, 84b, 85b
debt reversals in, 84b
duration of crises in, 235
external default by, 98
housing prices in, 159, 226
Pick’s Currency Yearbooks, 36–37
Poland: banking crises in, 379t
Brady bonds in, 84b, 85b
de-dollarization in, 194f, 195–96
duration of crises in, 235
graduation in, 287
inflation crises in, 182, 185
policy makers: early warning system and, 281
recommendations to, 287–90
on U.S. current account balance, 208–15
on U.S. housing bubble, 212–13
political disunity, in public defaults, 53
Ponzi schemes, 55, 58
Portugal: banking crises in, 171, 379t
external default by, 87, 87t
graduation in, 287
international capital markets of 1800s in, 398n8
PPP. See purchasing power parity
presidential elections: 2002 Brazilian, 53
2008 U.S., 53
press coverage, of U.S. subprime crisis, 199
prices: after currency debasements, 174
data on, 35–36, 296–301t
private debt: in debt intolerance, 26
in financial turbulence index, 251
lack of data on, 220
recent rise of, 399n4
and U.S. subprime crisis, 209, 212, 220
protectionism, during Great Depression, 264
Prussia. See Germany
public (government) debt: in aftermath of crises, 224–25, 231–32, 231t, 232f, 237–38
after banking crises, xxxii, 142, 163, 169–71, 170f, 224–25, 231–32, 231t, 232f
versus central bank debt, 9b
composition of, 40–42
crises of confidence in, xli–xlv
data available on, 40–42, 327–43
data gaps in, xxxi, xxxiii–xxxiv, xliv, 34, 137–38, 281–82
in Great Depression, 237–38, 237f
inflating out of, 111–18, 125, 127, 137, 175
international institutions on, xxxiv, 138, 281–82
as precursor to crises, 219–20, 221f
systemic risks of, xxxiii. See also domestic public debt; external public debt; total public debt
public finances, data on, 39
purchasing power parity (PPP), 37
quantitative approach, xxv, xxvii
“rare” events, misperception of, xxvii–xxviii
ratings, sovereign risk: after crises, 232–33, 233f
historical changes in, 284–87, 285–86t, 288f
ratings agencies, on rescheduling as partial default, 62
rationality, of creditors, 62–63
real estate prices, commercial, 408n2. See also housing prices
recessions: of 2001, global, 187
in aftermath of crises, 230, 232
associated with banking crises, 145–47, 172–73
associated with global financial crises, 270
associated with U.S. subprime crisis, 219
duration of, 230, 235
of Great Depression, 235
recovery: from debt intolerance, 29–30, 33
from global financial crises, 249, 269–70. See also graduation
recurring default. See serial default
regional crises, financial turbulence index for, 249, 252, 257–59
regions, of debt intolerance, 27–29, 29f
regulation, international: in financial sector, 145
international institutions’ role in, 278, 281–82
need for, 278, 282
releveraging, 83, 84b–85b
repayment of domestic debts: incentives for, 65–67, 110–11
reputation approach to, 65
repayment of external debts: in colonial era, 54
confidence in, 58–59, 60–61
in debt crisis of 1980s, 51–52
enforcement of, 53–58, 65
incentives for, 54–58
military force in, 54–55
partial (See partial default)
reputation approach to, 55–58
willingness versus ability of debtors in, 51–52, 54. See also reschedulings
repression, financial: and banking crises, 143, 205
in capital markets, 66–67
and domestic public debt, 66–67, 106, 117
as form of taxation, 143
reputation: overall international, 58
in repayment of domestic debts, 65
in repayment of external debts, 55–58
reschedulings: in 1800s, 90, 91t
in 1900s and 2000s, 52, 95t, 96t
as form of partial default, 62, 90–92
reserve losses, in exchange rate crises, 6
restructuring: in aftermath of banking crises, 230
in external defaults, 12, 83b–85b
revenue, government: after banking crises, 166–69, 167f, 168f, 169f
data on, 314–19t
ratios of external debt to, 120–23, 120t, 121f, 122f
seignorage, 119, 125, 174, 175, 400n7. See also tax revenues
Ricardian equivalence, 110
Ricardian model of debt, 65
risk premiums, 62–63
risk-sharing benefits: to capital market integration, 30–31
definition of, 30
Romania: banking crises in, 379–80t
duration of crises in, 235
external default by, 51–52
Royal Exchange, 93b
run-up to crises: domestic public debt in, 123–24, 123f
financial sector growth in, 210
GDP in, 129, 130f
Great Depression, 15–17, 16b
housing prices in, 159
inflation in, 129–33, 131f, 132t
U.S. subprime crisis, xxix, xliii, 200, 208–15
Russia: art treasures of, 52, 397n1
banking crises in, 206, 380t
currency debasement in, 177, 178f
debt reversals in, 84b
exchange rate crises in, 190
external default by, 12, 61
financial crisis of 1998 in, 52, 256
financial turbulence index for, 256
inflation crises in, 185
international capital markets of 1800s in, 398n8
total default in, 61
Rwanda, banking crises in, 380t
S&P ratings, 62, 250
Santo Domingo, banking crises in, 380t
Sao Tome and Principe, banking crises in, 381t
savings and loan crisis of 1984, U.S., 215
savings glut, global, 79, 209, 211
Scotland, banking crises in, 381t
Second Great Contraction. See Great Contraction, Second
Second Great Depression, 248
Securities and Exchange Commission, U.S., 214
securitization: definition of, 404n13
in U.S. subprime crisis, 208, 210, 213
seignorage revenues, 119, 125, 174, 175, 400n7
Senegal, banking crises in, 381t
seniority, of domestic versus external default, 128–38, 272
sequencing of crises, xxxiii, 270–73, 271f
serial banking crises, 141, 150
serial default: debt intolerance in, 21, 29–33
definition of, 14–15
early history of, 70b–71b, 86–89, 87t
graduation from, 147, 151–53, 171, 283
need for research on, 32
partial, 15
prevalence in emerging markets, xxvii
time between episodes of, 67, 83
wholesale, 14–15
Seven Years’ War (1756–1763), 88b
severity index. See financial turbulence index
shadow banking system, xli
shocks, financial: in banking crises, 145, 146
in contagion, 241, 242, 246
short-term debt: in bank runs, 144–45
illiquidity in, 59–61
reasons for use of, 59
recent development of bias toward, 105–6
rolling over of, 59–61
wars financed with, 70b
Sierra Leone, banking crises in, 381t
signals approach, 279–81, 280t, 408n3
silver currency: data on, 37, 305–6t
debasement of, 6, 175–77, 178f
in Spain, 71b
Singapore: banking crises in, 381t
inflation crises in, 182–85
Slovakia, banking crises in, 382t
Slovenia, banking crises in, 382t
solvency crises, 59–61
South Africa: banking crises in, 382t
financial turbulence index for, 257
inflation crises in, 182
South America. See Latin America
South Sea bubble, 88b, 93b
sovereign bankruptcy, 52
sovereign debt. See public debt
sovereign default. See domestic public debt crises; external public debt crises
sovereign lending. See international lending
sovereign risk ratings: after crises, 232–33, 233f
historical changes in, 284–87, 285–86t, 288f
Soviet Union, collapse of, 206. See also Russia
Spain: bailout costs in, 164
banking crises in, 158, 159, 164, 382–83t
colonies of, 71b, 93b
currency debasement in, 178f
current account balance in, 244
external default in (See Spanish external default)
housing prices in, 159
international debt markets in, 54, 70b–71b
Spanish external default: before 1800, xxx, 70b–71b, 86, 87t, 88b, 89, 89f
in 1800s, 92
capital inflows in, 89, 89f
graduation from serial, 147, 283
Spanish Succession, War of the (1701–1714), 88b
Special Data Dissemination Standard, IMF, 42, 282
spillovers. See contagion
Sri Lanka, banking crises in, 383t
Standard and Poor’s (S&P) ratings, 62, 250
Statistical Abstract, League of Nations, 114t
Statistical Yearbook, League of Nations, 41, 82b, 330t, 331t, 332t, 333t, 334t, 335t, 336t, 337t, 338t, 339t, 340t, 341t, 342t, 343t
stimulus measures: in banking crises, 169, 289–90
in emerging markets, 33
stock market crashes: of 1929,
this-time-is-different syndrome before, 17
Barro-Ursúa definition of, 250, 252, 253f, 254f, 407n7
in financial turbulence index, 250, 255
stock prices: data on, 326t
in global financial crises, 262, 263f
subprime crisis of 2007. See Great Contraction, Second
United States sub-prime crisis of 2007
subprime mortgages: international investment in, 242–45
rise of, 213
sudden stop: definition of, 74–75, 407n6
in emerging markets, 74–75, 229–30