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Working Paper
Slow capital, fast prices: Shocks to funding liquidity and stock price reversals
A V-shaped price pattern is often observed in financial markets - in response to a negative shock, prices fall "too far" before reversing course. This paper looks at one particular channel of such patterns: the link between a liquidity provider's balance sheet and asset prices. I examine a well-identified historical case study where a large exogenous shock to a liquidity provider's balance sheet resulted in severe capital constraints. Using evidence from German universal banks, who acted as market makers for selected stocks in the interwar period, I show in a difference-in-differences ...
Working Paper
Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay
This review essay is intended as a critical review of Humpage (2015), and it expands on the issues raised in that volume. Federal Reserve Policy during the financial crisis, and in its aftermath are addressed, along with the relationship to historical experience in the U.S. and elsewhere in the world.
Working Paper
The Evolving Core of Usable Macroeconomics for Policymakers
We provide a brief primer on how the core of usable macroeconomic theory for monetary policymakers has evolved over the past 50 years. Today’s policy discussions center on the New Keynesian (NK) synthesis, which builds on the Neoclassical growth model and the AS-AD framework. It incorporates nominal and real rigidities, financial and labor market frictions, the importance of expectations, and inspired terms used by policymakers such as “anchored inflation expectations” and “forward guidance.” While essential for communication during the Great Recession and Covid-19 pandemic, these ...
Journal Article
The Rise and Decline of Petersburg, Va.
Early Virginians looked at Petersburg, with its location on the Appomattox River, as a town of economic vibrancy and promise. Incorporated in 1748 by the Virginia General Assembly, the town fulfilled that early promise and grew to become the commonwealth's third independent city in 1850. But turmoil as well as prosperity for Petersburg were ahead. {{p}} Throughout its 270 years, three factors have dominated Petersburg's economic history: tobacco, trade, and transportation. The city's early economic prominence was due to its tobacco plantations and warehouses as well as various mills powered ...
Working Paper
The Effect of Fertility on Mothers’ Labor Supply over the Last Two Centuries
This paper documents the evolving impact of childbearing on the work activity of mothers. Based on a compiled dataset of 441 censuses and surveys between 1787 and 2015, representing 103 countries and 48.4 million mothers, we document three main findings: (1) the effect of fertility on labor supply is small and typically indistinguishable from zero at low levels of development and economically large and negative at higher levels of development; (2) this negative gradient is remarkably consistent across histories of currently developed countries and contemporary cross-sections of countries; and ...
Journal Article
Economic History: The Bank War
In his July 1832 veto message of the bill rechartering the Second Bank of the United States, President Andrew Jackson didn't hold back. Beyond characterizing the bank as hopelessly corrupt, he argued "the powers conferred upon [the bank were] ... not only unnecessary, but dangerous to the Government and the country." He went on, warning that if it continued to operate, "great evils... might flow from such a concentration of power in the hands of a few men irresponsible to the people." He argued that its power would only grow, as its leaders could "put forth their strength to influence ...
Journal Article
From Ye Olde Stagnation to Modern Growth in England
Modern economic growth is a relatively recent phenomenon in history, but what led economies out of stagnation?
Discussion Paper
Financial Fragility without Banks
Proponents of narrow banking have argued that lender of last resort policies by central banks, along with deposit insurance and other government interventions in the money markets, are the primary causes of financial instability. However, as we show in this post, non-bank financial institutions (NBFIs) triggered a financial crisis in 1772 even though the financial system at that time had few banks and deposits were not insured. NBFIs profited from funding risky, longer-dated assets using cheap short-term wholesale funding and, when they eventually failed, authorities felt compelled to rescue ...
Journal Article
Economic History: The Rise and Fall of Company Towns
The rise and fall of Gary — and that of company towns across the country — mirrors the arc of the nation's economy. From the textile mills of the early 1800s to the coal mines of the 20th century to the manufacturing hubs that defined America's industrial prowess, the story of the United States can be told through the company town. It is a tale of abundance and abandonment, boom and bust, plenty and poverty.
Newsletter
Marginal Product of Labor and U.S. Westward Expansion
History and economic concepts explain the westward migration of the U.S. population in the early nineteenth century.