THE HISTORY OF

FINANCIAL CRISES

Critical Concepts in

Edited by D'Maris Coffman and

Larry Neal

Volume I The early modern paradigmatic cases

ij Routledge Taylor & Francis Croup LONDON AND NEW YORK CONTENTS

VOLUME I THE EARLY MODERN PARADIGMATIC CASES

Editor acknowledgements xiii Acknowledgements xv Chronological table of reprinted articles and chapters xvii

Introduction 1

1 The economic crisis of 1619 to 1623 7 CHARLES P. KINDLEBERGER

2 The monetary movements of 1600-1621 in Holland and 33 W. A. SHAW

3 The '' period and its effects on upper 52 HEIDELINDE JUNG

4 The of and the leap to money 62 STEPHEN QUINN AND WILLIAM ROBERDS

5 The Dutch monetary environment during Tulipmania 68 DOUG FRENCH

6 Extracts from Famous First Bubbles 80 P M. GARBER

V CONTENTS

7 The Mania in Holland in the years 1636 and 1637 119 N. W. POSTHUMUS

8 The Tulipmania: fact or artifact? 150 EARL A. THOMPSON

9 The Integration and efficiency of the London and Amsterdam markets in the eighteenth Century 169 LARRY NEAL

10 Extracts from Famous First Bubbles 188 P. M. GARBER

11 Trading options before Black-Scholes: a study of the in late seventeenth-century London 196 ANNE L. MURPHY

12 The myths of the South Sea Bubble 223 JULIAN HOPPIT

13 Financial markets can go mad: evidence of irrational behaviour during the South Sea Bubble 246 RICHARD S. DALE, JOHNNIE E. V. JOHNSON AND LEILEI TANG

14 analysis can go mad (in the search for irrational behaviour during the South Sea Bubble) 285 GARY S. SHEA

15 Pitfalls in the quest for South Sea rationality 310 RICHARD S. DALE, JOHNNIE E V. JOHNSON AND LEILEI TANG

16 New evidence on the first financial bubble 317 RIK G. P. FREHEN, WILLIAM N. GOETZMANN AND K. GEERT ROUWENHORST

17 Was 's system a bubble? The Mississippi bubble revisited 362 FRANCOIS R VELDE

18 The crisis of and the Law affair, 1712-26 382 PHILIP T HOFFMAN, GILLES POSTEL-VINAY AND JEAN-LAURENT ROSENTHAL

vi CONTENTS

19 Abuses of the system 406 E. LEVASSEUR

VOLUME II THE GROWTH OF FINANCIAL CAPITALISM

Acknowledgements vii

Introduction 1

20 Efficiency of the Dojima rice futures market in Tokugawa-period Japan 6 SHIGERU WAKITA

21 'Veritable goid mines before the arrival of railway competition': but did signal rates of return in the English industry? 25 A. J ARNOLD AND S. McCARTNEY

22 The first bank of the and the crash of 1792 52 DAVID J. COWEN

23 The financial crises of 1825 and the restructuring of the British financial system 73 LARRY NEAL

24 Promotion, and their outcome: the 'steamship mania'of 1824-1825 107 DAVID M. WILLIAMS AND JOHN ARMSTRONG

25 , interest groups, legal institutions and the repeal of the Bubble Act in 1825 127 RON HARRIS

26 Jacksonian , specie flows, and the 150 PETER L. ROUSSEAU

27 The of 1845-1847: market irrationality or collusive swindle based on accounting distortions? 182 S. McCARTNEY AND A. J. ARNOLD

Vll CONTENTS

28 Myopie rationality in a mania 216 GARETH CAMPBELL

29 The : origins, Transmission, and Containment 249 CHARLES W. CALOMIRIS AND LARRY SCHWEIKART

30 Market contagion: evidence from the panics of 1854 and 1857 275 MORGAN KELLY AND CORMAC Ö GRÄDA

31 Western grains and the Panic of 1857 295 JAMES L. HUSTON

32 Extracts from Lombard Street 313 W.BAGEHOT

33 Business and financial conditions following the Civil War in the United States 371 WARREN M. PERSONS, PIERSON M. TUTTLE AND EDWIN FRICKEY

34 The Crisis of 1873: perspectives from multiple asset classes 402 SCOTT MIXON

VOLUME III THE GOLD STANDARD ERA

A cknowledgements ix

Introduction 1

35 The in a Mexican mirror 5 BARRY EICHENGREEN

36 The Baring Crisis and the Brazilian , 1889-1891: an early example of contagion among emerging capital markets 30 GAIL D. TRINER AND KIRSTEN WANDSCHNEIDER

37 The Barings Crises of 1890 and 1995: causes, courses, consequences and the danger of domino effects 57 JAN KÖRNERT

viii CONTENTS

38 The 'Wizard of Oz' as a monetary allegory 80 HUGH ROCKOFF

39 Free banking gone awry: the Australian banking crisis of 1893 101 CHARLES R. HICKSON AND JOHN D. TURNER

40 Causes of bank suspensions in the 122 MARK CARLSON

41 Bank fragility, 'money under the mattress', and long-run growth: US evidence from the 'perfect' Panic of 1893 147 CARLOS D. RAMIREZ

42 The American Crisis of 1907 178 O. M. W. SPRAGUE

43 Real shock, monetary aftershock: the 1906 San Francisco earthquake and the 193 KERRY A. ODELL AND MARC D. WEIDENMIER

44 Bank panics and the endogeneity of central banking 216 GARY GORTON AND LIXIN HUANG

45 The Bank Panic of 1907: the role of the trust com panies 236 JON MOEN AND ELLIS W. TALLMAN

46 Liquidity creation without a central bank: house loan certificates in the banking panic of 1907 255 ELLIS W. TALLMAN AND JON R. MOEN

47 Not just the Great Contraction: Friedman and Schwartz's A Monetary History of the United States 1867 to i960 285 MICHAEL D. BORDO AND HUGH ROCKOFF

48 Nonmonetary effects of the in the propagation of the Great Depression 293 BEN S. BERNANKE

ix CONTENTS

49 The of the Great Depression: a comparative approach 320 BEN S. BERNANKE

50 The gold Standard, deflation, and financial crisis in the Great Depression: an international comparison 350 BEN BERNANKE AND HAROLD JAMES

51 Financial factors in the Great Depression 385 CHARLES W. CALOMIRIS

52 The 1929 : was right 411 ELLEN R. McGRATTAN AND EDWARD C. PRESCOTT

53 Was there a bubble in the 1929 stock market? 431 PETER RAPPOPORT AND EUGENE N. WHITE

54 The role of liquidity and implicit guarantees in the German twin crisis of 1931 456 ISABEL SCHNABEL

55 The stock market boom and crash of 1929 revisited 493 EUGENE N. WHITE

56 The failure of the Bank of United States: a reappraisal 511 JOSEPH L. LUCIA

57 Why do bank runs look like panic? A new explanation 525 YEHNING CHEN AND IFTEKHAR HASAN

58 The 1931 Sterling crisis and the independence of the Bank of 537 WILLIAM H. JANEWAY

X CONTENTS

VOLUME IV THE MODERN ERA

Acknowledgements vii

Introduction 1

59 Assessing damages: the 1983 Israeli bank shares crisis 5 ASHER A. BLASS AND RICHARD S. GROSSMAN

60 Latin American : I don't think we are in Kansas anymore 19 CARLOS F. DIAZ-ALEJANDRO

61 Real interest rates and the : the moral hazard premium 78 JOHN B. SHOVEN, SCOTT B. SMART AND JOEL WALDFOGEL

62 Banking on a bailout: directors' and oflicers' liability Insurance policy exclusions in the context of the savings and loan crisis 91 M MÄZEN ANBARI

63 Spatial dimensions of the savings and loan crisis 129 BARNEY WARF AND JOSEPH C. COX

64 Portfolio Insurance and the market crash 149 MARK RUBINSTEIN

65 The new speculative stock market: why the weak immunizing effect of the 1987 crash? 164 J. PATRICK RAINES AND CHARLES G. LEATHERS

66 Crisis dynamics of implied recovery ratios: evidence from Russia and Argentina 180 JOHN J. MERRICK JR.

67 Contagion in international bond markets during the Russian and the LTCM crises 199 MARDI DUNGEY, RENEE FRY, BRENDA GONZALEZ-HERMOSILLO AND VANCE MARTIN

XI CONTENTS

68 The double bubble at the turn of the Century: technological roots and structural implications 230 CARLOTA PEREZ

69 The subprime crisis and house price appreciation 262 WILLIAM N. GOETZMANN, LIANG PENG AND JACQUELINE YEN

Index 297

xii