All terms Economic History

begrippen

Systemic financial crises

Banking sector experiences bank runs, sharp increases in default rates accompanied by large losses of capital that result in public intervention, bankruptcy, or forced merger of financial institutions

Path dependent systems

Past events and initial conditions can have persistent effects

Malthusian theory

Links demographic and economic variables

Malthusian trap

Human population growth, if unchecked, will outpace food production, leading to a cycle where rising living standards cause population booms, which then strain resources, resulting in famine, disease and war, (Malthusian checks), ultimately forcing living standards and population back down to a subsistence level, a self-correcting misery cyle.

European Marriage Pattern (EMP)

After Black Death, men and women in Northwest Europe married relatively late and often not at all. (25 to 40% fewer births than biologically possible)

Dutch disease

Inflation caused real exchange rate appreciation, so Iberian industry sectors became uncompetitive

Institutional resource curse

Spanish and Portuguese governments could rely on American precious metals for their revenues

Induced Innovation thesis

Technical change is induced by changes in relative factor prices

Public good

non-rival, non-exclusive good

Unified growth theory

Human capital is key to modern economic growth

Bourgeois virtues

McCloskey argues that a culture that valued economic entreprise and innovativeness drove the Industrial Revolution

Coordination theory

one absent or drunk worker could grind industrial production proces to a halt

Coercion theory

Employer-friendly labor market institutions allowed capitalists to extract more work per unit of pay e.g. financial and corporeal punishment backed by judiciary.

Self-control theory

While factory workers resented factory discipline they were more productive than comparable non-factory workers and they liked the higher pay, so workers kept signing factory contracts.

Great Divergence

The separation between countries who transitioned to modern economic growth first and those who were delayed.

New economic geography (NEG)

Explains the joint occurrence of trade specialization and income divergence through increasing returns to scale and agglomeration effects.

Core-periphery pattern

If region A specializes in production with increasing returns and region B specializes in production with constant returns, region A will grow faster than region B. (Which deindustrializes)

Meiji Restoration (1868)

Japan makes deliberate effort to modernize.

Habbakuk thesis

High wages induce labor-saving mechanization, i.e. big farming machines.

Hayami-Ruttan thesis

different endowments require different technologies.

Anarchy

High private expropriation risk (Social losses and risks caused by private expropriation (e.g., lawlessness, violent property disputes, or theft by citizens due to the absence of effective state enforcement)

Despotism

High state expropriation risk (Social losses and risks caused by state expropriation (e.g., autocratic seizure of land, abuse of power, or corruption by government officials due to the absence of legal constraints)

Private ordenings

Citizens settle disputes themselves

State ownership

Government official adjudicates disputes.

Gerschenkron thesis

Late industrializers may require greater state initiative to overcome missing prerequisites.

TseTse fly

transmits parasite that causes sleeping sickness in humans and is deadly to livestock

Communes

City with local administration in which at least part of citizens participated.

Intensive kinship norms

Conformity, obedience, in-group loyalty & trust.

Loose kinship norms (WEIRD)

individualism, independence, impersonal fairness and trust, which facilitates cooperation across kinship groups

Kindleberg

Positive feedback loop between credit and stock prices.

Speculation effect

Credit up, stock prices up

Balance sheet effect

Stock prices up, wealth up, credit up

Financial instability hypothesis

Alternation of financial euphoria and depression lead to large aggregate demand fluctuations.

Hedge finance

Income larger or equal to debt service and repayment

Speculative finance

Income equal to debt service

Ponzi finance

Income less than debt service

Minsky moment

Once economy is highly indebted, minor bad news can trigger a financial crisis

Ruhr campaign

German government calls for a general strike and passive resistance in the occupied territories.

Monetary Theory

Focuses on central bank actions. It regulates money supply and interest rates. This management aims to control inflation rates. It also promotes sustainable economic growth.

Fiscal theory

Analyzes government budget policies. It uses taxation and public spending. These tools influence aggregate economic demand. Governments adjust deficits to stabilize growth.

Revisionist policies

Assume strong public finances are bad for future reparation negotiations.

Young plan

Abolition of transfer protection, sudden stop of capital inflows.

Dawes plan

Reduction of reparation payments for short term.

First panic

Black Thursday on October 24th. Banks try to stem stock price fall.

Second panic

Black tuesday on October 29th.

Spending hypothesis

Great Depression was caused by a drop in autonomous consumption demand.

Keynes/Hansen secular stagnation thesis

Demand decline due to slowdown in population growth.

Monetary hypothesis

A monetary contraction caused the Great Depression in the U.S.

Friedman & Schwarz allegation

FED failed to stabilize money supply. Should have acted as lender of last resort to prevent bank runs.

First banking crisis (October 1930)

Bank of united states goes bankrupt. (Largest bank failure in U.S. history until then)

Second banking crisis (march 1931)

Smaller U.S. banking crisis. Central European banking crisis starts. (In Austria, Germany, etc.)

Economic trilemma

It’s impossible to have these 3: independent monetary policy, fixed exchange rates and free capital mobility.

Bank holiday

On March 6th, 1933 president Roosevelt announces a 4 day closure of banks.

Bagehot’s rule

Central banks should act like lenders of last resort that lend freely at penalty rates against good collateral.

Malinvestment thesis

As a consequence of bad loans, banks were insolvent rather than liquid.

Balance sheet channel

Any shock that negatively affects net worth of borrowers makes it more difficult for them to borrow.

Hume’s price-specie flow model

Gold flows adjust prices automatically, which tends to restore balance across countries. It’s an automatic mechanism linking gold, money supply, and prices to correct international inbalances.

Genoa conference 1922

Resumption of gold convertibility, but CBs were encouraged to hold part of their reserves in form of foreign exchange rather than gold.

Poincaré stabilization (1926)

Undervaluation of the Franc. Massive gold inflows into France. Banque de France sterilizes gold inflows.

M1

money multiplier x cover ratio x FX-ratio (formula = (m1/base)*(base/res)*(res/gold)*gold))

Austerity

G down, Y and P down, RER down, NX up

New deal policies

Variety of lending and spending programs and new regulations

National Recovery Administration (NRA)

Their goal is to fight cut throat competition and promote fair practices

World bank

Supply development finance in world with restricted capital mobility

International Monetary fund (IMF)

Acts as lender of last resort among central banks to avoid BOP crises and make orderly external adjustments more likely

World Trade Organisation (WTO)

Depoliticize trade disputes to make trade war less likely