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

• Published in: The American economic review Vol. 106; no. 5; pp. 574 - 580
• Main Authors: Reinhart, Carmen M., Reinhart, Vincent, Trebesch, Christoph
• Format: Journal Article
• Language: English
• Published: Nashville American Economic Association 01-05-2016
• Subjects: 19th century; Analysis; Bond issues; Capital movement; Commodity prices; Default; DO CAPITAL FLOWS NEED TO BE TAMED; Economic crisis; Economic theory; Emerging markets; Exports; GDP; Gross Domestic Product; History; Interest rates; Sovereign debt; Studies; Time series; World War I; World War II
• ISSN: 0002-8282; 1944-7981
• DOI: 10.1257/aer.p20161014

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.