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Asymmetric Propagation of Financial Crises During the Great Depression

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This paper aims to identify the main factors of international fi nancial crisis propagation during the 1930s. Based on an extensive cross-country dataset documenting exchange market turbulence, bond spreads and stock market returns at a monthly frequency and using Principal Component Analysis, I explore the main factors of co-movement in the international fi nancial series. I fi nd that the 1931 crash accounts for most of the co-movement between countries on all financial markets. Not only was the 1931 crisis the main global shock of the Great Depression, but it also acted divisively. Some countries remained una ffected by the shock and even benefi ted from the crisis. I suggest that these countries’ speci c path over the 1930s was related to their position as net exporters of capital during the credit boom of the previous decade.

This talk is part of the Financial History Seminar series.

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