Aggregate Price Shocks and Financial Stability: The United Kingdom 1796-1999
NBER Working Paper No. 8583
This paper investigates the impact historically of aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of U.K. financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of aggregate price shocks on the index. We find that price level shocks contributed significantly to financial instability during 1820-1931, and that inflation rate shocks contributed to instability during 1972-99. Both the nature of aggregate price shocks and their impact depend on the existing monetary and financial regime, but price shocks historically have been a source of financial instability.
Document Object Identifier (DOI): 10.3386/w8583
Users who downloaded this paper also downloaded* these: