The History of Financial Crises. 4 Vols.
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Brazilian Inflation and GDP from 1850 to 2000: an Empirical Investigation
Brazilian Inflation and GDP from 1850 to 2000: An Empirical Investigation Eurilton Araujo Ibmec Business School Alexandre Cunha Ibmec Business School RESUMO A possibilidade de que políticas de combate à inflação possuam efeitos negativos sobre a atividade econômica real e o crescimento é um assunto recorrente no Brasil. Neste traba- lho foram utilizados dados anuais para se estudar o comportamento da inflação e do PIB brasileiro de 1850 até 2000. Adotaram-se técnicas econométricas e da literatura de ciclos econômicos para se estudar o comportamento dessas duas variáveis nos domínios do tempo e da freqüência. Os resultados sugerem que as duas séries não são positivamente relacio- nadas. Assim sendo, a evidência empírica aparentemente indica que a opção de abrandar a política de combate à inflação com intuito de não prejudicar a atividade econômica real e o crescimento não está disponível para os condutores da política econômica brasileira. PALAVRAS-CHAVE inflação, crescimento, ciclos econômicos ABSTRACT The question of whether a policy that leads to low inflation can hamper real economic activity and growth is a recurrent one in Brazil. In this essay we used yearly data to study the behavior of Brazilian inflation and GDP from 1850 to 2000. We used econometric and business cycles techniques to study the behavior of these variables in time and frequency domains. The results suggest the absence of positive comovement between the series. Thus, the empirical evidence apparently implies that the option of easing up on inflation to avoid a slowdown in real economic activity and growth is not available to Brazilian policy makers. KEY WORDS inflation, growth, business cycles JEL Classification C32, E31, E32 EST. -
1 Stern School of Business New York University B30.2392.30 Prof
Stern School of Business New York University B30.2392.30 Prof. Richard Sylla Spring 2009 KMC 8-65, 998-0869 Weds, 6-9 Off.Hrs: W 4-6 & by app't KMC 4-120 email: [email protected] The Development of Financial Institutions and Markets Course description: The credit crisis of 2007-08 came as no surprise to financial historians who have studied such events going back four or more centuries. This course studies the historical development of financial institutions and markets, in a comparative international context with emphasis on the USA. It covers monetary, banking, central banking, and securities market history, as well as pertinent aspects of the history of government finance and the emergence of corporations as a dominant business form. Topics include the emergence of modern financial systems in history, including the roles of public finance and money, banking and central banking, and securities and insurance markets. We study the composition, growth, fluctuations, and determinants of the money stock; the development of banking systems and their regulation; the emergence of central banking and its key role in modern financial systems; monetary policies; major trends and fluctuations in stock, bond, and money markets; and, of course, the history of financial crises. Readings: For a course such as this there are no ideal texts, despite the richness of the literature in book and article form. As a compromise between ideal and real, I have chosen several books that are comprehensive in treatments of their subjects (and perhaps one or two are worth keeping on your shelf after the course is over). -
“To Establish a More Effective Supervision of Banking:” How the Birth of the Fed Altered Bank Supervision
“To Establish a More Effective Supervision of Banking:” How the Birth of the Fed Altered Bank Supervision Abstract Although bank supervision under the National Banking System exercised a light hand and panics were frequent, the cost of bank failures was minimal. Double liability induced shareholders to carefully monitor bank managers and voluntarily liquidate banks early if they appeared to be in trouble. Inducing more disclosure, marking assets to market, and ensuring prompt closure of insolvent national banks, the Comptroller of the Currency reinforced market discipline. The arrival of the Federal Reserve weakened this regime. Monetary policy decisions conflicted with the goal of financial stability and created moral hazard. The appearance of the Fed as an additional supervisor led to more “competition in laxity” among regulators and “regulatory arbitrage” by banks. When the Great Depression hit, policy-induced deflation and asset price volatility were misdiagnosed as failures of competition and market valuation. In response, the New Deal shifted to a regime of discretion-based supervision with forbearance. 100th Anniversary of the Jekyll Island Conference Federal Reserve Bank of Atlanta Eugene N. White Rutgers University and NBER Department of Economics New Brunswick, NJ 08901 USA Phone: 732-932-7363 Fax: 732-932-7416 [email protected] October 2010 “An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.”—the title of the Federal Reserve Act of 1913 [emphasis added] While the formation and development of the Federal Reserve has been intensively studied, histories of the Fed, from Milton Friedman and Anna J. -
Riding the South Sea Bubble
Riding the South Sea Bubble By PETER TEMIN AND HANS-JOACHIM VOTH* This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare’s Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restric- tions on short sales or agency problems. Instead, this study demonstrates that predictable investor sentiment can prevent attacks on a bubble; rational investors may attack only when some coordinating event promotes joint action. (JEL G14, E44, N23) What allows asset price bubbles to inflate? light on other important episodes of market The recent rise and fall of technology stocks overvaluation. have led many to argue that wide swings in We examine one of the most famous and asset prices are largely driven by herd behavior dramatic episodes in the history of speculation, among investors. Robert J. Shiller (2000) em- the South Sea bubble. Data on the daily trading phasized that “irrational exuberance” raised behavior of a goldsmith bank—Hoare’s—allow stock prices above their fundamental values in us to examine competing explanations for how the 1990s. Others, however, have pointed to bubbles can inflate. While many investors, in- structural features of the stock market, such as cluding Isaac Newton, lost substantially in lock-up provisions for IPOs, analysts’ advice, 1720, Hoare’s made a profit of over £28,000, a strategic interactions between investors, and the great deal of money at a time when £200 was a uncertainties surrounding Internet technology, comfortable annual income for a middle-class as causes of the recent bubble. -
The Case for a Limited Central Bank Yeareen
The case for a Limited Central Bank Yun The Case for a Limited Central Bank Yeareen Yun [email protected] MOUNT HOLYOKE COLLEGE Volume 5, Number 1 Journal for Global Business and Community http://jgbc.fiu.edu Consortium for Undergraduate International Business Education The case for a Limited Central Bank Yun In his book, The Alchemists, Neil Irwin (2013) follows the history of the recent financial crisis of 2007, examining the difficult decisions made and the bold actions carried out by three central bankers: Ben Bernanke of the Federal Reserve, Mervyn King of the Bank of England, and Jean-Claude Trichet of the European Central Bank (ECB). Irwin not only justifies the unconventional methods such as quantitative easing, that was used by these three men, but applauds them, for “peace and prosperity… require people like Bernanke, King, and Trichet to safeguard them, often by doing things that are widely unpopular” (p.388). He accepts the expanding role of the central banks as a necessary measure given the changing times. He believes “central banks [should not] let precedent or politics stop them from doing what they need to do to keep their economies healthy” at all costs even, if it means bailing out investment banks, telling Parliament how to manage its books, and propping up financially troubled economies (p.390). Irwin believes we shouldn’t expect perfection, but rather progress, and trust intelligent men to handle economic crises and manage the economies in ways that they best see fit because they are so “technically complex that we can’t put them to a vote” (p.390). -
This Is the Heritage Society After All – to 1893, and the Shape of This
1 IRVING HERITAGE SOCIETY PRESENTATION By Maura Gast, Irving CVB October 2010 For tonight’s program, and because this is the Irving Heritage Society, after all, I thought I’d take a departure from my usual routine (which probably everyone in this room has heard too many times) and talk a little bit about the role the CVB plays in an historical context instead. I’m hopeful that as champions of heritage and history in general, that you’ll indulge me on this path tonight, and that you’ll see it all come back home to Irving by the time I’m done. Because there were really three key factors that led to the convention industry as we know it today and to our profession. And they are factors that, coupled with some amazing similarities to what’s going on in our world today, are worth paying attention to. How We as CVBs Came to Be • The Industrial Revolution – And the creation of manufacturing organizations • The Railroad Revolution • The Panic of 1893 One was the industrial revolution and its associated growth of large manufacturing organizations caused by the many technological innovations of that age. The second was the growth of the railroad, and ultimately the Highway system here in the US. And the third was the Panic of 1893. The Concept of “Associations” 2 The idea of “associations” has historically been an American concept – this idea of like‐minded people wanting to gather together in what came to be known as conventions. And when you think about it, there have been meetings and conventions of some kind taking place since recorded time. -
October 19, 1987 – Black Monday, 20 Years Later BACKGROUND
October 19, 1987 – Black Monday, 20 Years Later BACKGROUND On Oct. 19, 1987, “Black Monday,” the DJIA fell 507.99 (508) points to 1,738.74, a drop of 22.6% or $500 billion dollars of its value-- the largest single-day percentage drop in history. Volume surges to a then record of 604 million shares. Two days later, the DJIA recovered 289 points or 16.6% of its loss. It took two years for the DJIA to fully recover its losses, setting the stage for the longest bull market in U.S. history. Date Close Change Change % 10/19/87 1,738.70 -508.00 -22.6 10/20/87 1,841.00 102.30 5.9 10/21/87 2,027.90 186.90 10.2 Quick Facts on October 11, 1987 • DJIA fell 507.99 points to 1,738.74, a 22.6% drop (DJIA had opened at 2246.74 that day) o Record decline at that time o Friday, Oct. 16, DJIA fell 108 points, completing a 9.5 percent drop for the week o Aug. 1987, DJIA reached 2722.42, an all-time high; up 48% over prior 10 months o Today, DJIA above 14,000 • John Phelan, NYSE Chairman/CEO -- Credited with effective management of the crisis. A 23-year veteran of the trading floor, he became NYSE president in 1980 and chairman and chief executive officer in 1984, serving until 1990 NYSE Statistics (1987, then vs. now) 1987 Today (and current records) ADV - ytd 1987 (thru 10/19): 181.5 mil ADV – 1.76 billion shares (NYSE only) shares 10/19/1987: 604.3 million shares (reference ADV above) 10/20/1987: 608.1* million shares (reference ADV above) Oct. -
Center for Institutional Reform and the Informal Sector
CENTER FOR INSTITUTIONAL REFORM AND THE INFORMAL SECTOR University of Maryland at College Park Center Office: IRIS Center, 2105 Morrill Hall, College Park, MD 20742 Telephone (301) 405-3110 l Fax (301) 405-3020 Financial Markets and Industrial Development: A Comparative Study of Government Regulation Financial Innovation, and Industrial Structure in Brazil and Mexico, 1840-1930 November 1994 Stephen Haber Working Paper No. 143 This publication was made possible through support provided by the U.S. Agency for International Development, under Cooperative Agreement No. DHR-0015-A-00-0031-00. The views and analyses in the paper do not necessarily reflect the official position of the IRIS Center or the U.S.A.I.D. Author: Stephen Haber, Department of History, Stanford University, Standford, CA. IRIS Summary Working Paper #143 Financial Markets and Industrial Development: A Comparative Study of Government Regulation, Financial Innovation and Industrial Structure in Brazil and Mexico 1840-1930. Stephen Haber Department of History Stanford University Stanford, CA 94305 This paper examines the experiences of Mexico and Brazil in the creation of modern banks and stock exchanges during the early stages of industrialization. It addresses three interrelated questions. First, what were the differences in the development of financial intermediaries in both countries. Second< what- were the consequences for the structure and rate of growth of industry of these differences in institutional development? Third, what were the sources of these differences in institutional development? Why did Brazil develop a modern stock and bond market during the 1890s and Mexico did not? In order to answer these questions, the pc3pe.K fucuses cl11 the history of textile mill finance in both countries. -
The Market's Boom/Bust Cycle
The Market’s Boom/Bust Cycle: Where are we today? Spring 2016 Presented by: Spencer Klein, CFA® - Senior Portfolio Manager IPPFA Regional Seminar – February 2016 STRICTLY PRIVATE AND CONFIDENTIAL 1 Outline A Change of Seasons … to Business Cycles … to Market Cycles … to Booms and Busts Suggestions STRICTLY PRIVATE AND CONFIDENTIAL 2 Early cycles are seasonal • Among the earliest of civilizations, business cycles can be thought to be attributed to the changing of the seasons and yields at harvest time. • Evidence for this can be found in irrigation efforts in agrarian societies of Egypt and China as well as crop rotation techniques pioneered in medieval Europe. STRICTLY PRIVATE AND CONFIDENTIAL 3 … seasons to business cycles • As civilizations matured and expanded, industry and trade advanced. • New products and methods amplified agricultural output. • Banking was not all that sophisticated. • Geographic and localized growth rate differences emerged. STRICTLY PRIVATE AND CONFIDENTIAL 4 … business cycles to market cycles • As commerce and banking became more sophisticated, differences in market could be more easily observed and serve as a base for profits themselves. • Initially, these three cycles reinforced each other. As time progressed, these three cycles would be in and out of phase for a host of reasons and an even wider range of impact. STRICTLY PRIVATE AND CONFIDENTIAL 5 Phases of the Real Business Cycle (RBC) • Expansion, Peak, Contraction, Trough • Q: When do recessions happen? • A: 2 quarterly declines in GDP. Wrong! • “The Committee -
Bubbles, Manias and Market Failures
7 February 2019 Bubbles, Manias and Market Failures PROFESSOR D’MARIS COFFMAN transcribed by Mr Imad Uddin Ahmed Thank you all, it’s a great honour to be here. This is actually my second time lecturing in this hall. I was first here about 5 years ago in 2013 when I was talking about something else entirely. I’m thrilled to be back, and I would like to thank Michael Mainelli, who is not here, for in fact convincing me to do this for a second time. Tonight, I’ll talk about bubbles, manias and market failures and particularly about the unintended consequences of regulatory responses to these events. And I think when you begin talking about the subject, it’s almost imperative that you start with Tulipmania which is the paradigmatic early-modern financial crisis. Some of you may recognise this wonderful print from 1637/38 by Peter Nolpe which shows a fool’s cap in which people are playing a gambling game that was played in the inns near the flower markets. It was a kind of auction game, bit of a spread-betting game in which they bid up the price of tulips. And this print shows the devastation that Tulipmania was supposed to have caused to the morals and the economic welfare of the Dutch republic. Now most of when we actually see copies of this print, don’t see the copies from the 1636-37 but rather recycled copies from the 1720s in a much different context. We’ll talk in a moment about that context. -
Interview of George Mehales About the Stock Market Crash of 1929, December 1938
Interview of George Mehales about the Stock Market Crash of 1929, December 1938 One day, one of my customers showed me how much money he was making in the market. I had never even thought about the stock market before. For a few days, I looked at the market page in the newspaper. It looked good to me, and I bit with what you folks call 'hook, line and sinker.' All the money I took in, I put into stocks. The first day of October in 1929 made me feel like I was rich. The stocks I bought had gone up and up. I sold some of them and bought others. I often thought about what my mother had said and that was “You'll get rich in America someday!' I should have paid for my fixtures, but I figured I could pay them any time. You might think I would have known better, but I didn't. I figured I could pay my debts any time, and I just let them ride. Trouble hit me hard during the last day of October of that year. I had become so interested with the market that I let my own business go down. I wasn't there half the time. I need my own place of business as a place to hang around in. Business dropped off, but I didn't care “cause I was making plenty money in the market. During the last days of October, my stocks began to drop. I was gambling on the margin. My brother called me and told me I would have to put up more cash. -
JP Morgan and the Money Trust
FEDERAL RESERVE BANK OF ST. LOUIS ECONOMIC EDUCATION The Panic of 1907: J.P. Morgan and the Money Trust Lesson Author Mary Fuchs Standards and Benchmarks (see page 47) Lesson Description The Panic of 1907 was a financial crisis set off by a series of bad banking decisions and a frenzy of withdrawals caused by public distrust of the banking system. J.P. Morgan, along with other wealthy Wall Street bankers, loaned their own funds to save the coun- try from a severe financial crisis. But what happens when a single man, or small group of men, have the power to control the finances of a country? In this lesson, students will learn about the Panic of 1907 and the measures Morgan used to finance and save the major banks and trust companies. Students will also practice close reading to analyze texts from the Pujo hearings, newspapers, and reactionary articles to develop an evidence- based argument about whether or not a money trust—a Morgan-led cartel—existed. Grade Level 10-12 Concepts Bank run Bank panic Cartel Central bank Liquidity Money trust Monopoly Sherman Antitrust Act Trust ©2015, Federal Reserve Bank of St. Louis. Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, provided the user credits the Federal Reserve Bank of St. Louis, www.stlouisfed.org/education. 1 Lesson Plan The Panic of 1907: J.P. Morgan and the Money Trust Time Required 100-120 minutes Compelling Question What did J.P. Morgan have to do with the founding of the Federal Reserve? Objectives Students will • define bank run, bank panic, monopoly, central bank, cartel, and liquidity; • explain the Panic of 1907 and the events leading up to the panic; • analyze the Sherman Antitrust Act; • explain how monopolies worked in the early 20th-century banking industry; • develop an evidence-based argument about whether or not a money trust—a Morgan-led cartel—existed • explain how J.P.