DP11096 Global Cycles: Capital Flows, Commodities, and Sovereign Defaults, 1815-2015

Author(s): Vincent Reinhart, Carmen M. Reinhart, Christoph Trebesch
Publication Date: February 2016
Keyword(s): capital flows, commodity prices, financial crises, sudden stops
JEL(s): E3, E44, F44, F6, G01, N10, N20
Programme Areas: Economic History, International Macroeconomics and Finance, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11096

Capital flow and commodity cycles have long been connected with economic crises. Sparse historical data, however, has made it difficult to connect their timing. We date turning points in global capital flows and commodity prices across two centuries and provide estimates from alternative data sources. We then document a strong overlap between the ebb and flow of financial capital, the commodity price super-cycle, and sovereign defaults since 1815. The results have implications for today, as many emerging markets are facing a double bust in capital inflows and commodity prices, making them vulnerable to crises.