ABSTRACT
A comparison of the 1980s with the 1990s is hardly an adequate basis for generalization, of course. In this paper we therefore elaborate the comparison along four dimensions. First, we compare the recent period with more than a century of financial crises, distinguishing the Bretton Woods period (1945 — 71), the interwar years (1919-39), and the gold standard era (1880 1913). Second, we extend the comparison from the frequency of crises to their depth and duration. Third, we compare the output losses from crises with the output losses from recessions in which no crises occurred. Fourth and finally, we ask whether the patterns we observe in the frequency, severity and longevity of crises are best explicable in terms of international economic policies (the flexibility of the exchange rate and the openness of the capital account) or the management of the domestic financial system. It will be evident that these two sets of variables correspond to the two leading explanations for the recent Asian crisis, one which attributes its outbreak and severity to international economic policies (unsustainable currency pegs and precipitous capital-account liberalization), the other which blames it on flawed domestic financial regulation. This illustrates how our findings can be used to shed light on the generality of popular explanations for the recent spate of crises.
