The Baring Crisis and the Great Latin American Meltdown of the 1890s

The Baring Crisis is the nineteenth century's most famous sovereign debt crisis. Few studies, however, have attempted to understand the extent to which the crisis mattered for countries other than Argentina and England. Using a new database consisting of more than 15,000 observations of weekly sovereign debt prices, we assess the extent to which the Barings Crisis affected other emerging market borrowers and find empirical evidence of a regional crisis. We find that Latin American yield spreads increased by more than 200 basis points during the crisis relative to the rest of the world, even after controlling for macroeconomic, trade, political-institutional factors, and other country-specific effects. Our evidence suggests that European investors may have sold off or reduced their holdings of Latin American securities in the wake of the Baring Crisis.

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