The Origins and Development of Financial Markets and Institutions From the Seventeenth Century to the Present
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Preface and acknowledgments
- 1 Financial innovations and crises: The view backwards from Northern Rock
- 2 An economic explanation of the early Bank of Amsterdam, debasement, bills of exchange and the emergence of the first central bank
- 3 With a view to hold: The emergence of institutional investors on the Amsterdam securities market during the seventeenth and eighteenth centuries
- 4 Was John Law's System a bubble? The Mississippi Bubble revisited
- 5 Sir George Caswall vs. the Duke of Portland: Financial contracts and litigation in the wake of the South Sea Bubble
- 6 The bell jar: Commercial interest rates between two revolutions, 1688–1789
- 7 Comparing the UK and US financial systems, 1790–1830
- 8 Natural experiments in financial reform in the nineteenth century: The Davis and Gallman analysis
- 9 Regulatory changes and the development of the US banking market, 1870–1914: A study of profit rates and risk in national banks
- 10 Anticipating the stock market crash of 1929: The view from the floor of the stock exchange
- 11 The development of “non-traditional” open market operations: Lessons from FDR's silver purchase program
- 12 The interwar shocks to US–Cuban trade relations: A view through sugar company stock price data
- 13 Central bank reaction functions during the inter-war gold standard: A view from the periphery
- 14 When do stock market booms occur? The macroeconomic and policy environments of twentieth century booms
- 15 Lessons from history for the twenty-first century
- Index
- References
14 - When do stock market booms occur? The macroeconomic and policy environments of twentieth century booms
Published online by Cambridge University Press: 04 August 2010
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Preface and acknowledgments
- 1 Financial innovations and crises: The view backwards from Northern Rock
- 2 An economic explanation of the early Bank of Amsterdam, debasement, bills of exchange and the emergence of the first central bank
- 3 With a view to hold: The emergence of institutional investors on the Amsterdam securities market during the seventeenth and eighteenth centuries
- 4 Was John Law's System a bubble? The Mississippi Bubble revisited
- 5 Sir George Caswall vs. the Duke of Portland: Financial contracts and litigation in the wake of the South Sea Bubble
- 6 The bell jar: Commercial interest rates between two revolutions, 1688–1789
- 7 Comparing the UK and US financial systems, 1790–1830
- 8 Natural experiments in financial reform in the nineteenth century: The Davis and Gallman analysis
- 9 Regulatory changes and the development of the US banking market, 1870–1914: A study of profit rates and risk in national banks
- 10 Anticipating the stock market crash of 1929: The view from the floor of the stock exchange
- 11 The development of “non-traditional” open market operations: Lessons from FDR's silver purchase program
- 12 The interwar shocks to US–Cuban trade relations: A view through sugar company stock price data
- 13 Central bank reaction functions during the inter-war gold standard: A view from the periphery
- 14 When do stock market booms occur? The macroeconomic and policy environments of twentieth century booms
- 15 Lessons from history for the twenty-first century
- Index
- References
Summary
Since the mid-1990s, many countries have experienced prolonged periods of rapid price appreciation in equity, housing, and other asset markets which have drawn the attention of economists and policymakers to the role of asset prices in the propagation of business cycles. Economists disagree about the appropriate response of monetary policy to such asset price booms. Some argue that financial markets are inherently volatile and that market prices often stray from fundamentals, suggesting that policymakers could improve welfare by deflating asset price booms, especially if sudden asset price declines are likely to depress economic activity. Other economists claim that financial markets process information efficiently or that policymakers usually cannot determine when assets are mispriced and, hence, that they cannot enhance aggregate welfare by reacting to asset price movements.
Such episodes have also fascinated financial historians, and research into these phenomena has yielded important information about the development of financial markets and the effects of financial regulation and macroeconomic policy on the stability of markets. We believe that history can also inform the debate about the appropriate response, if any, of monetary policy to asset price booms. Accordingly, this chapter investigates the macroeconomic and policy environments in which stock market booms occurred among ten developed countries during the twentieth century. Our multi-country historical approach enables us to explore the association between stock market booms and key macroeconomic and monetary policy variables across a variety of policy regimes and regulatory environments.
- Type
- Chapter
- Information
- The Origins and Development of Financial Markets and InstitutionsFrom the Seventeenth Century to the Present, pp. 416 - 449Publisher: Cambridge University PressPrint publication year: 2009
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