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American Economic Journal: Macroeconomics: Vol. 4 No. 1 (January 2012)

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Stories of the Twentieth Century for the Twenty-First

Article Citation

Gourinchas, Pierre-Olivier, and Maurice Obstfeld. 2012. "Stories of the Twentieth Century for the Twenty-First." American Economic Journal: Macroeconomics, 4(1): 226-65.

DOI: 10.1257/mac.4.1.226

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 significant 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. (JEL E44, F34, F44, G01, G21, O19)

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Authors

Gourinchas, Pierre-Olivier (U CA, Berkeley)
Obstfeld, Maurice (U CA, Berkeley)

JEL Classifications

E44: Financial Markets and the Macroeconomy
F34: International Lending and Debt Problems
F44: International Business Cycles
G01: Financial Crises
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
O19: International Linkages to Development; Role of International Organizations

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American Economic Journal: Macroeconomics



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