Economic history

Matthieu Chavaz, Marc Flandreau, 01 December 2016

Between 1870 and 1914, 68 countries – both sovereign and British colonies – used the London Stock Exchange to issue bonds. This column argues that bond prices and spreads in this period show that the colonies’ semi-sovereignty lowered credit risk at the price of higher illiquidity risk, and further worsened liquidity by attracting investors that rarely traded. Parallels between Eurozone and colonial bonds suggest that the pricing of liquidity and credit in government bond markets is an institutional phenomenon.

Michael Bordo, Arunima Sinha, 20 November 2016

In the wake of the Great Recession, the Federal Reserve took unprecedented measures to stem economic decline. This column uses the Fed’s open-market operations in 1932, another period of short-term rates near the zero lower bound, as a comparison for the QE1 operation of 2008-09. Although the 1932 policy boosted output and inflation, if the Fed had announced the operation in advance and carried it out for a full year, the Great Depression could have been attenuated considerably earlier.

Konrad Burchardi, Thomas Chaney, Tarek Hassan, 12 November 2016

The economic effects of the unprecedented levels of international migrations over the past few years are at the centre of political debates about immigration policy. This column evaluates the causal effect of migration on foreign direct investment using immigration patterns to the US going back to the 19th century. Foreign direct investment is found to follow the paths of historical migrants as much as it follows differences in productivity, tax rates, and education. The results suggest a mechanism of information flow facilitation, and that the effect of ancestry on foreign direct investment is very long-lasting.

Brandon Dupont, Thomas Weiss, 06 November 2016

The transportation revolution of the 19th century opened up new opportunities for migrant and tourist travel across the North Atlantic. While the impact of this revolution on freight cargoes and, to some extent, mass immigration has been well documented, we know considerably less about non-migrant overseas passenger travel. This column presents data on first class ocean travel fares between the US and the UK from 1826 to 1914, and demonstrates how such data can be gathered from various scattered sources and compiled into a reasonably reliable, representative, and informative long-term time series.

Martín Gonzalez-Eiras, Dirk Niepelt, 11 October 2016

The US fiscal system underwent a radical transformation in the 1930s. This column proposes a micro-founded general equilibrium model that blends politics and macroeconomics to explain the transformation. It rationalises tax centralisation and intergovernmental grants as the equilibrium response to the Sixteenth Amendment, which introduced federal taxation. The theory can also be used to forecast federal and regional taxes and government spending.

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