CHESS Chart: Why do Financial Crises Happen?

Next week Alan Taylor visits CHESS to discuss his paper on the history of financial crisis. Taylor shows how credit booms often lead to both financial crises and to longer and deeper recessions than normal. This chart shows that financial crises were fairly common in the 19th and early twentieth centuries, happening about every 15 to 20 years, stopped after World War II, and resumed following the end of the Bretton Woods System. So the question is whether we’re better off with the regulations that followed the Great Depression and Bretton Woods, including high capital requirements for banks. strict regulation of the financial system, and controls on international capital flows.

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The percentage share of countries worldwide experiencing the onset of a financial crisis in each year since 1800 for both the advanced (high-income) and emerging (middle- and low-income) groups of economies. From Alan M. Taylor, “Credit, Financial Stability, and the Macroeconomy,” Annual Review of Economics  7 (2015):313.

Join the discussion next Friday, November 13 at 12:30 in Whitney Humanities Center, 203.

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