SummaryThe crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyzes a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivaled only by the crisis-ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporates to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.

as well as helpful comments received from participants in workshops and conferences hosted by the Hoover Institution, Cato Institute, Fondo Latinoamericano de Reservas (FLAR), Bank of Canada, Banque de France, Norges Bank, Sveriges Riksbank, and the Swiss National Bank. Nonetheless, the views expressed here are solely those of the authors and do not represent the views of any other person or institution, nor those of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Gold Standard as a `Good Housekeeping Seal of Approval'In this paper we argue that adherence to the gold standard rule of convertibility of national currencies into a fixed weight of gold served as `a good housekeeping seal of approval' which facilitated access by peripheral countries to foreign capital from the core countries of western Europe. We survey the historical background of gold standard adherence in the period 1870-1914 by nine important peripheral countries. The sample includes the full range of commitment to the gold standard from continuous adherence, through intermittent adherence, to non-adherence. Evidence on the pattern of long-term government bond yields suggests that longterm commitment to the gold standard mattered even when bonds were denominated in gold:countries that remained on gold throughout the classical era were charged lower rates than countries that had a mixed record of adherence. Estimation of a CAPM model, using the differential between peripheral country rates and UK rates augmented by a list of `fundamentals,' and a dummy variable to capture gold standard adherence, reveals that capital markets attached significant weight to gold standard adherence. Countries with poor adherence records were charged considerably more than those with good records, enough to explain the determined effort to stay on gold made by a number of capital importing countries.