w13882

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1 NBER WORKING PAPER SERIES THIS TIME IS DIFFERENT: A PANORAMIC VIEW OF EIGHT CENTURIES OF FINANCIAL CRISES Carmen M. Reinhart Kenneth S. Rogoff Working Paper 13882 http://www.nber.org/papers/w13882 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 March 2008 The authors are grateful to Vincent Reinhart, John Singleton, Arvind Subramanian, and seminar participants at Columbia and Harvard Universities for useful comments and suggestions and Ethan Ilzetzki, Fernando Im, and Vania Stavrakeva for excellent research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views 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. © 2008 by Carmen M. Reinhart and Kenneth S. Rogoff. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

2 This Time is Different: A Panoramic View of Eight Centuries of Financial Crises Carmen M. Reinhart and Kenneth S. Rogoff NBER Working Paper No. 13882 March 2008 JEL No. E6,F3,N0 ABSTRACT This paper offers a "panoramic" analysis of the history of financial crises dating from England’s fourteenth-century default to the current United States sub-prime financial crisis. Our study is based on a new dataset that spans all regions. It incorporates a number of important credit episodes seldom covered in the literature, including for example, defaults and restructurings in India and China. As the first paper employing this data, our aim is to illustrate some of the broad insights that can be gleaned from such a sweeping historical database. We find that serial default is a nearly universal phenomenon as countries struggle to transform themselves from emerging markets to advanced economies. Major default episodes are typically spaced some years (or decades) apart, creating an illusion that "this time is different" among policymakers and investors. A recent example of the "this time is different" syndrome is the false belief that domestic debt is a novel feature of the modern financial landscape. We also confirm that crises frequently emanate from the financial centers with transmission through interest rate shocks and commodity price collapses. Thus, the recent US sub-prime financial crisis is hardly unique. Our data also documents other crises that often accompany default: including inflation, exchange rate crashes, banking crises, and currency debasements. Carmen M. Reinhart University of Maryland School of Public Policy and Department of Economic 4105 Van Munching Hall College Park, MD 20742 and NBER [email protected] Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 232 Cambridge, MA 02138-3001 and NBER [email protected]

3 I. Introduction The economics profession has an unfortunate tendency to view recent experience in the narrow window provided by standard data sets. With a few notable exceptions, cross- country empirical studies on financial crises typically begin in 1980 and are limited in 1 Yet an event that is rare in a three decade span may not several other important respects. be all that rare when plac ed in a broader context. This paper introduces a comprehensive base for studying new historical data international debt and banking crises, inflati on, currency crashes and debasements. The data covers sixty-six countries in Africa, Asia, Europe, Latin America, North America, and Oceania. The range of variables encompasses, among many other dimensions, external and domestic debt, trade, GNP, inflation, exchange rates, interest rates, and commodity prices. The coverage spans eight centuri es, generally going back to the date of independence for most countries, and well into th e colonial period for some. As we detail in an annotated heavily on the work of earlier scholars. appendix, the construction of our dataset has built However, it also includes a considerable amount of new material from diverse primary and dating of external debt and exchange rate secondary sources. In addition to a systematic per also catalogues dates for do mestic inflation and banking crises, the appendix to this pa crises. For the dating of sovereign defaults on domestic (mostly local currency) debt, see Reinhart and Rogoff (2008). The paper is organized as follows. Sec tion II summarizes highlights from a first view of the extended dataset, with special reference to the current conjuncture. Among other things, we note that pol icymakers should not be overl y cheered by the absence of major external defaults from 2003 to 2007, after the wave of defaults in the preceding two 1 Among many important previous studies include work by Bordo, Eichengreen, Lindert, Morton and Taylor. 1

4 decades. Serial default remains the norm, with international waves of defaults typically separated by many years, if not decades. oday seem lulled by the fact that many Many foreign investors and policymakers t less reliant on foreign currency external emerging market governments have become borrowing than in the recent past. Countries have instead been relying more on domestic as we show in a companion paper, reliance on currency debt issued in local markets. Yet, domestic debt is hardly new, and the view th at domestic debt can be largely ignored in nability is hard to reconcile with the extensive historical looking at external debt sustai 2 experience. Our dataset reveals that the phenomenon of serial default is a universal rite of passage through history for near ly all countries as they pa ss through the emerging market state of development. This includes not only Latin America, but Asia , the Middle East and Europe. We also find that high inflation, curr ency crashes, and debasements often go hand- find that historicall y, significant waves of in-hand with default. Last, but not least, we increased capital mobility are often followed by a string of domestic banking crises. w of the sample and data. Section IV Section III of the paper gives a brief overvie catalogues the history of serial default on extern al debts, from England’s defaults in the Middle Ages, to Spain’s thirteen defaults from the 1500s on, to twentieth-century defaults in Asia, Africa, and Latin America. Our databa se marks the years that default episodes are resolved as well as when they began, allowi ng us to look at the duration of default in addition to the frequency. Section V of the paper looks at the effect of global f actors on sovereign default, including commodity prices a nd capital flows emanating from the center countries. We 2 These issues are analyzed in detail in Reinhart and Rogoff (2008). 2

5 show how shocks emanating from the center countries can lead to financial crises US sub-prime financial crisis is hardly worldwide. In this respect, the 2007–2008 exceptional. Section VI shows that episodes of high in flation and currency debasement are just as much a universal right of passage as seri al default. Section VII introduces a composite ties of crises.” In the conc luding section, we take up the index that aggregates the “varie rennial problem of serial default. Will the issue of how countries can graduate from the pe st century prove different? early 21 Appendix A gives a brief synopsis of how the database was constructed, while Appendices I (macroeconomic series) and II (debt) list all the variables in the database and provide their sources on a period-by-period and count ry-by-country basis. II. First Insights: The Big Picture What are some basic insights one gains from this panoramic view of the history of financial crises? We begin by discussing s overeign default on external debt (i.e., a government default on its own external debt or private sector debts that were publicly guaranteed.) The first observation is that for the world as a whole (or at least the more than 90 percent of global GDP represented by our data set), the current period can be seen as a typical lull that follows larg e global financial crises. Figure 1 plots for the years 1800 to 2006 (where our dataset is most complete), the percentage of all independent countries in a state of default or re structuring during any given year. Aside from the current lull, one fact that jumps out from the figure are the long periods where a high percentage of al l countries are in a state of default or . restructuring . Indeed, there are five pronounced pe aks or default cycles in the figure 3

6 The first is during the Napoleonic War. The second runs from the 1820s through the late in the world were in default (including all 1840s, when, at times, nearly half the countries isode begins in the early 1870s and lasts for two decades. of Latin America). The third ep Figure 1 Sovereign External Debt: 1800-2006 Percent of Countries in Default or Restructuring 60 50 40 30 Percent of countries 20 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 8 7 6 5 4 3 2 1 0 9 8 7 6 5 4 3 2 1 0 0 9 9 9 9 9 9 9 9 9 9 8 8 8 8 8 8 8 8 8 8 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Year Sources: Lindert and Morton (1989), Macdonald (2003), Purcell and Kaufman (1993), Reinhart, Rogoff, and Savastano (2003), Suter (1992), and Standard and Poor’s (various years). Notes: Sample size includes all countries, out of a total of sixty six listed in Table 1, that were independent states in the given year. The fourth episode begins in the Great De pression of the 1930s and extends through the 3 The most recent early 1950s, when again nearly half of all countries stood in default. et debt crises of the 1980s and 1990s. default cycle encompasses the emerging mark Indeed, when one weights countries by th eir share of global GDP, as in Figure 2 below, the current lull stands out even more against the preceding century. Only the two decades before World War I—the halcyon days of the gold standard—exhibited tranquility 3 Kindleberger (1988) is among the few scholars who emphasize that the 1950s can be viewed as a financial crisis era. 4

7 4 anywhere close to that of the 2003-to-2007 period. Looking forward, once cannot fail to each lull note that whereas one and two decade lulls in defaults are not at all uncommon, has invariably been followed by a new wave of default. Figure 2 is interesting because it shows th e years after World War II as marking the ult era in modern world histor y, with countri es representing peak of by far the largest defa almost 40 percent of global GDP in a state of de is is partly a result fault or rescheduling. Th of new defaults produced by the war, but also due to the fact that many countries never 5 By the same emerged from the defaults surroundi ng the Great Depression of the 1930s. token, the Napoleonic War defaults become as important as any other period. Outside World War II, only the peak of e levels of the early 1800’s. the 1980s debt crisis nears th As we shall see when we tabulate indi vidual country experi ences in Section IV , serial default on external debt—that is, repeated sovereign default—is the norm throughout every region in the world, even including Asia and Europe. 4 This comparison weights defaulting countries by share of world income. On an unweighted basis (so, for example, the poorest countr ies in Africa and South Asia receive th e same weight as Brazil or the United States), the late 1960s until 1982 had an even lower percentage of independent countries in default. 5 Kindleberger (1989) emphasizes the prevalence of default after World War II, though he does not provide quantification. 5

8 Figure 2 Sovereign External Debt: 1800-2006 Countries in Default Weighted by Their Share of World Income 45 40 35 All countries in sample 30 25 20 Excluding Percent of world Income China 15 10 5 0 0 4 8 2 6 0 4 8 0 6 2 2 8 4 3 0 1 2 4 5 7 8 9 4 2 8 1 6 5 89 0 8 8 8 8 8 8 8 8 9 9 9 0 1 1807 1 1821 1 1835 1 1849 1 1863 1 1877 1 1891 1 1905 19 19 1947 19 1 19 1933 1 1 1919 1975 1961 1996 2 Year Sources: Lindert and Morton (1989), Macdonald (2003), Maddison (2003), Purcell and Kaufman (1993), Reinhart, Rogoff, and Savastano (2003), Suter (1992), and Standard and Poor’s (various years). Notes: Sample size includes all countries, out of a total of sixty six listed in Table 1, that were independent states in the given year. Three sets of GDP weights are used, 1913 weights for the period 1800–1913, 1990 for the period 1914–1990, and finally 2003 weights for the period 1991–2006. We have already seen from Figure 2 that gl obal conflagration can be a huge factor ive new dataset also confirms the prevailing in generating waves of defaults. Our extens view among economists that uding commodity prices and global economic factors, incl 6 center country interest rates, play a major role in precipitating sovereign debt crises. We take up this issue in Sec tion V. Making use of a range of real global commodity price indices, we show that over the period 1800 to 2006, peaks and troughs in commodity price cycles appear to be leading i ndicators of peaks and troughs in the capital flow cycle, with troughs typically resulting in multiple defaults. 6 See Bulow and Rogoff (1990), and Mauro, Sussman and Yafeh (2006). 6

9 An even stronger regularity found in the literatu re on modern financial crises (e.g., and Rogoff, 2008b) is that countries Kaminsky and Reinhart, 1999 and Reinhart experiencing sudden large capital inflows are at a high risk of having a debt crisis. The to be true over a much broader sweep of preliminary evidence here suggests the same history, with surges in capita l inflows often preceding external debt crises at the country, regional, and global level since 1800 if not before. Also consonant with the modern striking correlation between theory of crises is the freer capital mobility and the incidence of banking crises, as illustrated in Figure 3. Periods of high international capital mobi lity have repeatedly produced international banking crises, not only famously as they did in the 1990s, but historically. The figure e of all countries expe plots a three-year moving average of the shar riencing banking crises on the right scale. On the left scale, we employ our favored index of capital mobility, due , updated and backcast using thei r same design principle, to to Obstfeld and Taylor (2003) cover our full sample period. While the Obst feld–Taylor index may have its limitations, mmary of complicated forces by emphasizing we feel it nevertheless provides a concise su de facto capital mobility based on actual flows. The dating of banking crises episodes is di scussed in detail in the Appendix. What separates this study from previous efforts (t hat we are aware of) is that for so many countries, our dating of crises extends back to far before the much-studied modern post– World War II era; specifically we start in 1800. (See Table A.3 for details.) Our work was greatly simplified back to 1880 by the careful study of Bordo, et al. (2001)—but for the earlier period we had to resort to arch eological work. The earliest advanced economy banking crisis in our sample is Denmark in 1813; the two earliest ones we clock in emerging markets are India, 1863 and Peru 10 years later. 7

10 Figure 3 - Capital Mobility and the Incidence of Banking Crisis: All Countries, 1800 High 1 35 2007 Share of Countries 0.9 in Banking Crisis, 3-year 30 1914 Sum 0.8 (right scale ) 25 0.7 0.6 20 0.5 Capital Mobility Percent Index 15 (left scale) 0.4 1825 0.3 1980 10 1860 0.2 1945 5 1918 0.1 Low 0 0 1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Sources: Bordo et al. (2001), Caprio et al. (2005), Kaminsky and Reinhart (1999), Obstfeld and Taylor (2004), and these authors. Notes: As with external debt crises, sample size includ es all countries, out of a total of sixty six listed in Table 1 that were independent states in the given year. On the right scale, we updated our favorite index of y, but a concise summary of complicated forces. The smooth red line capital mobility, admittedly arbitrar ility given by Obstfeld and Taylor (2003), backcast shows the judgmental index of the extent of capital mob from 1800 to 1859 using their same design principle. (The aforementioned Peruvian case come s from a little-known 1957 book published in Lima by Carlos Camprubi Alcazar entitled Historia de los Bancos en el Peru, 1860–1879. There are many more such case studies in our re a vital source of references that we information on banking crises.) 7 As noted, our database includes long ti me series on domestic public debt. Because historical data on domestic debt is so difficult to come by, it has been ignored in the empirical studies on debt a nd inflation in developing countr ies. Indeed, many generally knowledgeable observers have argued that the recent shift by many emerging market 7 the time period considered, domestically issued debt For most emerging market economies, over most of was in local currency and held principally by local residents. External debt, on the other hand, was typically in foreign currency, and held by foreign residents. 8

11 8 governments from external to domestic bond i ssues is revolutionary and unprecedented. be further from the truth, wi As we shall argue, nothing could th implications for today’s markets and for historical analyses of debt and inflation. Until very recently, domestic debt was not on the radar screen of the multilateral institutions. Neither the International Mone tary Fund nor the World Bank systematically collected such data. In fact, cross-country historical time se ries on domestically issued debt are also absent from private data collections . Reinhart, Rogoff and Savastano (2003), with extensive help from IMF staff and country s ources, put together an annual series going 9 back to 1990 for a limited number of emerging market countries. The topic of domestic debt is so impo rtant, and the implications for existing empirical studies on inflation and external de fault are so profound, that we have broken out our data analysis into an independent comp anion piece (Reinhart and Rogoff, 2008). Here, we focus on a few major points. The first is that contrary to much contemporary opinion, of government debt in most countries, domestic debt constituted an important part including emerging markets, over most of their existence. Figure 4 plots domestic debt as a share of total public debt over 1900 to 2006. For our entire sample of si xty-six countries, domestically issued debt averages more than 50 percent of total debt for most of the period. (This figure is an unweighted average of the individual country ratios.) Even fo r Latin America, the domestic debt share is typically over 30 percent and has be en at times over 50 percent. Furthermore, contrary to the received wisdom, this data reveal that a very important share of domestic debt—even in emerging markets— was long-term maturity 8 See the IMF Global Financial Stability Report, April 2007; many private investment-bank reports also trumpet the rise of domestic debt as a harbinger of stability. 9 Since then, Jeanne and Guscina (2008) have extended them both back to 1980 and up to 2005. 9

12 Figure 4 Domestic Public Debt as a Share of Total Debt, 1900-2006 1.00 N f orth A which merica o 0.90 0.80 0.70 ll countries A 0.60 0.50 Share 0.40 0.30 0.20 of which Latin America 0.10 0.00 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 Sources: The League of Nations, the United Nations, and others sources listed in Appendix II. ( we also present a va riety of evidence to Reinhart and Rogoff 2008a). In that paper, ry least, domestic debt does no t appear to be junior to support the view that, at the ve ent’s ability to default via inflation. external debt, even factoring in a governm As payments on domestic debt must come from the same revenue stream as payments on foreign debt, the implication is that the extent of domestic debt can be quite important in assessing the sust ainability of a country’s exte rnal debt payments. Yet, because it has not been possible to obtain exte nsive historical time series on domestic debt until now, most empirical researchers have ignor ed the issue entirely. Reinhart and Rogoff find that the same issue arises in the analys is of high inflation; most of the empirical literature since Cagan’s classic (1956) paper has focused on the “seignorage” gains from inflation, which are entirely le vered off the real money base . Yet, the government’s gain to unexpected inflation often derives at leas t as much from capital losses that are Figure 5 on inflation and external inflicted on holders of long-term government bonds. 10

13 elation between the sh are of countries in default (1900–2006) illust rates the striking corr default on debt at one point and the number of countries experiencing high inflation (which we define to be inflation over 20 percent pe r annum). Since World War II, inflation and default have gone hand-in-hand. Figure 5 Inflation and External Default: 1900-2006 50 Corre lations: 1900-2006 0.39 45 Share of countries in excluding the Great Depression 0.60 1940-2006 0.75 default 40 35 30 Share of countries with 25 inflation above 20 percent 20 Percent of countries 15 10 5 0 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 9 9 8 8 6 7 8 7 5 6 3 4 5 6 4 2 3 4 1 2 2 0 0 1 0 0 0 2 0 8 6 8 6 6 4 4 2 6 4 2 4 0 2 0 8 2 0 8 0 8 6 4 0 4 Year Sources: For share of countries in default, see Figure 1; for high inflation episodes, see Appendix I. Notes: Both the inflation and default probabilities are simple unweighted averages. tic debt has important lessons for the present. As we The forgotten history of domes have already noted, most investment banks, not to mention official bodies such as the International Monetary Fund and the Worl d Bank, have argued that even though total public debt remains quite high today (early 2008) in many emerging markets, the risk of default on external debt has dropped dramatically , especially as the share of external debt has fallen. This conclusion seems to be built on the faulty premise that countries will treat s into accepting lower repayments or simply domestic debt as junior, bullying domestic 11

14 defaulting via inflation. The hi storical record, however, s uggests that a high ratio of rall public debt is cold comfor t to external debt holders. domestic to external debt in ove Default probabilities probably depend much mo re on the overall level of debt. Reinhart and Rogoff (2008b) discuss the interesting exam ple of India, who in 1958 rescheduled its foreign debts when it stood at only1/4 percent of revenues. The sums were so minor that the event did not draw great atte ntion in the Western press. The explanation, as it turns out, is that India at this time had a significan t claim on revenue from the service of domestic debt (in effect the total debt-to revenue ratio was 4.4. To summ arize, many investors appear to be justifying still relatively low extern al debt credit spreads because “This time is different” and emerging market governments are now relying more on domestic public debt. If so, they are deeply mistaken. Another noteworthy insight from the “panoramic view ” is than that the median duration of default spells in the post–World Wa r II period is one-half the length of what (3 years versus 6 years, as shown in Figure 6). it was during 1800–1945 The charitable interpretation of this fact is that crisis resolution mechanisms have diplomacy. After all, Newfoundland lost improved since the bygone days of gun-boat nothing less than her sovereignty when it de faulted on its external debts in 1936 and ultimately became a Canadian province; Egypt, among others, became British “protectorates” following their defaults. A more cynical explan ation points to the possibility that, when bail-outs are facilitate d by the likes of the International Monetary Fund, creditors are willing to cut more slack to their serial-defaulting clients. The fact remains that, as Bordo and Eichengreen (2001) observe, the number of years separating much lower. Once debt is restructured, default episodes in the more recent period is 12

15 Savastano (2003) for empirical countries are quick to relevera ge (see Reinhart, Rogoff, and evidence on this pattern). Figure 6 Duration of Default Episodes: 1800-2006 frequency of occurrence, percent 1946-2006 20 169 episodes Median is 3 years 15 1800-1945 127 episodes 10 Median is 6 years 5 0 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 4 1 Years in Default Sources: Lindert and Morton (1989), Macdonald (2003), Purcell and Kaufman (1993), Reinhart, Rogoff, and Savastano (2003), Suter (1992), Standard and Poor’s (various years) and authors’ calculations. of years from the year of default to the year of Notes: The duration of a default spell is the number resolution, be it through restructuring, repayment, or debt forgiveness. The Kolmogorov–Smirnoff test for comparing the equality of two distributions rejects the null hypothesis of equal distributions at the 1% significance level. III. A Global Database on Financial Crises with a Long-term View In this section, we provide a slim outline of the character of the sample and the building blocks of this database. Extens ive detail is provided in three appendices. Country coverage Table 1 lists the sixty-six countries in our sample. Importantly, we include a large number or Asian and African economies, wh ereas previous studies of the same era erall, our dataset incl udes thirteen African typically included at most a couple of each. Ov 13

16 countries, twelve Asian countri es, nineteen European countri es, eighteen Latin American countries, plus North America and Oceana. As the final column in Table 1 illustrates, six countries indeed our sample of sixty- accounts for about 90 percent of world GDP. Of course, many of these countries, particularly those in Africa and Asia, have become independent nations only relatively recently (column 2). These recently independent countries have not been exposed to the Latin American countries, and we will have to risk of default for nearly as long as, say, the 10 calibrate our inter-country comparisons accordingly. may be considered default virgins, at Table 1 flags which countries in our sample least in the narrow sense that they have ne ver failed to meet their debt repayment or of countries includ es the high-income rescheduled. One conspicuous grouping Anglophone nations, the United States, Canada, Australia, and New Zealand. (The mother country, England, defaulted in earli er eras as we shall see.) Also included are all of the Scandinavian countries, Norwa y, Sweden, Finland and Denmark. Also in Europe, there is ysia, Singapore, Taiwan, Thailand and Korea. Belgium. In Asia, there is Hong Kong, Mala Admittedly, the latter two countries, especia lly, managed to avoid default only through ackages during the last 1990s debt crisis and massive International Monetary Fund loan p otherwise suffered much of the same tr auma as a typical defaulting country. Also, of default-free countries, only Thaila nd existed as an independent state before the end of World War II. For others, the potential opportunity for default has been relatively short. Lastly, severa l of the sovereign de fault virgins, notably the United States, qualify as such only because we are excluding ev ents such as lowering the gold content of 10 Our sample excludes many of the world’s poorest countries, who by and large cannot borrow meaningful amounts from private sector lenders, and who have virtually all effectively defaulted even on heavily subsidized government-to-government loans. This is an interesting subject for another study, but here we are mainly interested in financial flows that, at least in the first instance, had a substantial market element. 14

17 the currency in 1933, or the suspension of conve teenth-century Civil rtibility in the nine War. Finally, there is one count ry from Africa, Mauritius, which has never defaulted or restructured. It is notable th at the non-defaulters, by and larg e, are all hugely successful growth stories. This begs the question: Do hi gh growth rates help avert default, or does averting default beget high growth rates? Table 1 also flags which countries in our sample have not defaulted on their external debts, at least in the narrow sense th at they have not outright failed to meet their debt repayment on schedule in an important wa y on even one occasion. This is an issue we will return to in Section IV. Dates and Frequency of Coverage Appendix A describes the data in detail, while Appendices I and II provide specifics on coverage and sources on a c -by-period basis for all the ountry-by-country and period time series. All the data is a nnual—this includes the crises da tes. Below we provide a list of the variables used in this study. Crises-related variables Debt Our debt data covers central government public debt—external and domestic. The latter is decomposed into shor t-term and long-term debt in ma ny, but not all, cases. For a large number of countries the time series go back to the 1800s, if not earlier. However, ecomes much more comprehensive. Debt is starting in 1913, the coverage for our sample b perhaps the most novel f eature of the dataset. 15

18 Table 1. Countries, Regions, and World GDP Country (An asterisk denotes no sovereign Year of Independence Share of World Real GDP 1990 International Geary–Khamis US dollars default or rescheduling history) 1913 1990 Africa Algeria 1962 0.23 0.27 Angola 1975 0.00 0.03 Central Africa Republic 0.00 0.01 1960 Cote D’Ivoire 0.00 0.06 1960 Egypt 1831 0.40 0.53 Kenya 1963 0.00 0.10 1968 0.00 0.03 Mauritius * Morocco 1956 0.13 0.24 Nigeria 1960 0.00 0.40 South Africa 1910 0.54 0.36 0.10 Tunisia 1591/1957 0.06 Zambia 1964 0.00 0.02 0.00 0.05 Zimbabwe 1965 Asia China 1368 8.80 7.70 Hong Kong * India 1947 7.47 4.05 1.65 1.66 Indonesia 1949 Japan 1590 2.62 8.57 Korea * 1945 0.34 1.38 Malaysia * 1957 0.10 0.33 Myanmar 1948 0.31 0.11 Philippines 1947 0.53 0.34 Singapore * 1965 0.02 0.16 0.09 1949 0.74 Taiwan * 0.27 Thailand * 1769 0.94 Europe Austria 1282 0.86 0.48 1830 1.18 0.63 Belgium * 980 0.35 0.43 Denmark * 1917 0.23 0.31 Finland * France 943 5.29 3.79 Germany 1618 8.68 4.67 Greece 1829 0.32 0.37 Hungary 1918 0.60 0.25 Italy 1569 3.49 3.42 Netherlands * 1581 0.95 0.91 1905 0.22 Norway * 0.29 Poland 1918 1.70 0.72 Portugal 1139 0.27 0.40 Romania 1878 0.80 0.30 Russia 1457 8.50 4.25 Spain 1476 1.52 1.75 Sweden 0.64 0.56 1523 Turkey 1453 0.67 1.13 United Kingdom * 1066 8.22 3.49 (2007), Maddison (2004). Sources: Correlates of War Notes: An asterisk denotes no sovereign external default or rescheduling history. 16

19 Table 1 (concluded) Countries, Regions, and World GDP Share of World Real GDP Year of Independence 1990 International Geary–Khamis US dollars 1913 1990 Latin America 1.06 0.78 Argentina 1816 0.05 Bolivia 1825 0.00 Brazil 1822 0.70 2.74 Chile 1818 0.38 0.31 0.23 Colombia 1819 0.59 1821 0.00 0.05 Costa Rica Dominican Republic 0.06 1845 0.00 Ecuador 1830 0.00 0.15 0.00 1821 El Salvador 0.04 0.11 0.00 Guatemala 1821 0.00 0.03 Honduras 1821 1.91 0.95 Mexico 1821 Nicaragua 1821 0.02 0.00 0.04 0.00 Panama 1903 0.05 0.00 Paraguay 1811 Peru 1821 0.16 0.24 0.07 0.14 Uruguay 1811 0.12 0.59 Venezuela 1830 North America 1.94 1.28 1867 Canada * 1783 United States * 21.41 18.93 Oceania 0.91 1901 1.07 Australia * 0.17 New Zealand * 1907 0.21 Total Sample-66 countries 93.04 89.24 (2007), Maddison (2003). Sources: Correlates of War Prices The data on prices is the most comprehensiv e in our set of variab les, going back to Turkey) and Asia. For the New World (the the early Middle Ages for Europe (including United States and some of the larger Latin Am erican countries), these data go back to the 1700s. Where possible, we use consumer prices (o r cost-of-living) indices. On the basis of this data, we construct the inflation series that allow us to date inflation crises. 17

20 Exchange rates Exchange rates in this database come in two forms: For the pre-1600s period, silver content of the currency, for which we exchange rate data are constructed from the have data through the mid-1800s for 11 countries ; beginning in the early 1600s, the Course of the Exchange in Amsterdam established ac tual market-based exchange rates, marking the beginning of modern exch ange rates, for which we have a far more comprehensive coverage. As in Reinhart and Rogoff (2004), we use market-based exchange rates, where possible. These data underpin our dating of currency crashes. external and domestic default Varieties of Crises: Banking, and These time series are dichotomous variables that take on the valu e of one if it is a crisis year and zero otherwise a nd are standard in the literature on crisis. Particulars of the criteria used to define a banking crisis or an external or domes tic default crisis are given in Appendix A. Government Finances, Trade, and GDP Our dataset incorporates data on central government expenditures and revenues. On the whole, these provide some of the most reliable data on country size and economic strength in the era prior to development of conventional national income. Furthermore, these data are available for many countries, including African countri es (where data is relatively scarce), throughout most of their colonial history. The trade data (exports and imports) are next in reliability to the fiscal data. Like their fiscal counterparts, thes e data offer longer history than the national accounts that are of a relatively more modern vintage. Having reasonably accurate output data is t hus of enormous help in calibrating the for most countries pr ior to the twentieth severity of crises. Unfortunately, GDP data 18

21 century are quite uneven. For ma ny emerging markets, data ar e only available sporadically iting in trying to assess the impact of crises. and at long intervals, which is especially lim Fortunately, we do have reliable estimates for a sufficient number of countries so as to be able to draw broad conclusions and, of cour se, we can use government revenue and trade data to supplement these estimates , as discussed in Appendix A. The primary use of the revenue, exports, and GDP series in our analysis is to scale debt, that is to construct the sta ndard debt-to-revenues, etc., ratios. Capital Flows Pre–World War II gross capital flows are m easured by data on debentures. Where possible, we also reconstruct net flows by taking gross new issuance minus repayment, taking into account partial defaults and negotia ted interest rate reduc tions that often take place during rescheduling episodes. For the pos t-war, we rely on the actual balance-of- payments data, as reported by the multilate ral institutions or the country sources. Financial center data and global commodity prices In modern times, emerging market financia l crises have often been triggered by (1990) and others have argued. To capture events at the center, as Bulow and Rogoff developments in financial centers post-1800, we include: measures of short- and long-term interest rates, real GDP, and current account balances. During most of the nineteenth century, Britain was the global financial center. Since World War II, it has been the United States, but both countries were influential dur ing the long transition period from British to U.S. financial hegemony. Commodity prices have long been thought to be another importan t global driver of the depression–prosperity cycles in modern times . Our historical dataset combines several different indices of commodity prices, w ith the oldest dating back to 1790. 19

22 IV. Serial Default 1350–2006 ountries have defaulted at least once and When one looks carefully, virtually all c onomy phase, a period many several times on external debt during th eir emerging market ec t one or two centuries. that typically takes at leas Early Default, 1500 –1799 m credit for inventing serial default. Today’s emerging markets can hardly clai Table 2 lists the number of defaults, including default years, between 1300 and 1799 for a number of now rich European countries (Aus tria, France, Germany, Portugal, and Spain). nt serial default. As the table illustrates, today’s emerging market countries did not inve ies, had similar problems when they were Rather, a number of today’s now-wealthy countr “emerging markets.” Table 2. The Early External Defaults: Europe, 1300–1799 Number of defaults Country Years of default Austria 1796 1 England 1340, 1472, 1594* 2* France 1558, 1624, 1648 1661, 1701, 1715 8 1770, 1788 1683 1 Germany (Prussia) Portugal 1560 1 Spain 1557, 1575, 1596, 6 1607, 1627, 1647 Sources: MacDonald (2006), Reinhart, Rogoff and Savastano (2003) and sources cited therein. The “*” for England denotes our uncertainty at this time about whether its default was on domestic or external debt. yet unbroken. Indeed, Spain a record that remains as Spain’s defaults establish th century alone, after having defaulted six managed to default seven times in the nineteen times in the preceding three centuries. 20

23 With its later string of nine teenth-century defaults, Spai n took the mantle for most s debt obligations on eight occasions between defaults from France, which had abrogated it had a habit of executing major domestic 1500 and 1800. Because the French monarchs creditors during external debt default episodes (an early form of “debt restructuring”), the 11 The French Finance Minister population came to refer to th ese episodes as “bloodletting.” opined that governments should default at Abbe Terray, who served from 1768–1774, even 12 least once every 100 years in order to restore equilibrium (Winkler, p. 29). Remarkably, however, despite all the trauma the country experienced in the wake of the French Revolution and the Napoleonic Wars, France eventually managed to emerge did not default after 1812 in the nineteenth or from its status of serial default. France twentieth century nor (so far, anyway) in the twenty-first cen tury. There is, however, some debate as to whether France and others defaul ted on a portion of their World War I debts to 13 only once in the period up to 1800, but Austria and Portugal defaulted the United States. times during the nineteenth cen tury, as we shall see. then each defaulted a handful of England, however, is perhaps an even ear lier graduate. Edward III, of Britain, defaulted on debt to Italian lenders in 1340 (see, for example, MacDonald, 2007), after a failed invasion of France that set off the Hundred Years’ War. A century later, Henry VIII, in addition to engaging in an epic debasement of the currency, seized all the Catholic Church’s vast lands. While not strictly a bond default, such seizures, often accompanied by executions, qualify as reneging on financial obligations. 11 See Reinhart, Rogoff and Savastano (2003) who thank Harald James for this observation. 12 One wonders if Thomas Jefferson read those words, in that he subsequently held that “the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.” 13 See Lloyd (1934). 21

24 Sovereign Defaults, 1800–2006 e combination of the development of Starting in the nineteenth century, th e emergence of a number of new nation states, international capital markets together with th Table 3 lists nineteenth-century default and led to an explosion in international defaults. rescheduling episodes in Africa, Europe and Latin America. We include debt reschedulings, which the international finance theory literature rightly categorizes as negotiated partial defaults (Bulow and Rogoff, 1989). We briefly digr ess to explain this decision, which is fundamental to understandi bt crisis episodes. ng many international de Reschedulings constitute partial default for two reasons. The first reason, of course, is that debt reschedulings ofte n involve reducing interest rates, if not principle. Second, and perhaps more importantly, international debt reschedulings typically saddle investors with illiquid assets that may not pay off for decades. This illiquidity is a huge cost to investors, forcing them to hold a risky asset, often with compensation far below market. It held defaulted sovereign debt for a sufficient is true that in some cases, investors that number of years—sometimes decades—have often yielded a return similar to investing in relatively riskless financial cente over the same period. Indeed, r bonds (U.K. or later U.S.) a number of papers have been written show ing precisely such cal culations (e.g., Mauro, Sussman and Yaffa, 2006). While interesting, it is important to undersco re the fact that the right benchmark is the return on high-risk illiquid assets, not highl y liquid low-risk assets. It is no coincidence that in the wake of the US sub-prime mortgage debt crisis of 2007, sub-prime debt sells at steep discount relative to the expected value of future repayments. Investors rightly believe that if they could pull out th eir money, they could earn a mu ch higher return elsewhere in lliquid positions with s ubstantial risk. And the economy provided they are willing to take i 22

25 of course they are right. Inve precisely how venture capital sting in risky illiquid assets is and private equity, not to mention university endowments, have succe eded (until now) in earning enormous returns. By contrast, de bt reschedulings at negotiated below-market interest rates give the creditor risk with none of the upside of say, a venture capital investment. Thus the distinction betw een debt rescheduli ngs—negotiated partial defaults—and outright defaults (which typically end in partial repayment) is not a sharp one. Table 3 also lists each country’s year of independence. Most of Africa and Asia was colonized during this peri od, allowing Latin America and Europe a substantial head start. The only African count ries to default during this period were Egypt (1876) and Algeria (1867). Austria defaulted a remarkable 5 times, albeit not quite so prolific as Spain.. Greece, which gained its independence only in 1829, made up for lost time by defaulting four times. Default was similarly rampant throughout the Latin American region, with Venezuela defaulting six times, and Costa Rica, Honduras, Colombia and the Dominican Republic each defaulting four times. Looking down the columns of Table 3 also gi ves us a first glimpse at the clustering of defaults across regions and internationally. Note that a number of countries in Europe defaulted during or just after the Napoleoni c wars, while many countries in both Latin America (plus their mother country Spain) defaulted during the 1820s. Most of these defaults are associated with Latin America’s wars of independence. Although none of the subsequent clusterings is quite so pronounced in terms of number of countries, there are notable global default epis odes during the late 1860s up to the mid-1870s, and again We will later look at this clustering a bit starting in the mid-1880s through the early 1890s. more systematically. 23

26 Table 3. External Default and Rescheduling: Africa, Europe, and Latin America, Nineteenth Century Country/date of Dates 1 independence 1800–1824 1825–1849 1850–1874 1875–1899 Africa 1831 1876 Egypt, Tunisia 1867 Europe 1868 Austria–Hungary 1802, 1805, 1811, 1816 France 1812 Germany Hesse 1814 1807, 1813 Prussia Schleswig– Holstein 1850 Westphalia 1812 Greece, 1829 1826, 1843 1860 1893 Netherlands 1814 1828, 1837, 1841, Portugal 1852 1890 1845 Russia 1839 1885 Spain 1809, 1820 1831, 1834 1851, 1867, 1872 1882 Sweden 1812 Turkey 1876 Latin America Argentina, 1816 1827 1890 Bolivia, 1825 1875 Brazil , 1822 1898 Chile , 1818 1826 1880 1819 1850, 1873 1880 Colombia, 1826 1825 1874 1895 Costa Rica, 1828 Dominican 1872 1892, 1897, 1899 Republic, 1845 Ecuador, 1830 1826 1868 1894 1821 1828 El Salvador, 1898 Guatemala, 1828 1876, 1894, 1899 1821 Honduras, 1821 1828 1873 Mexico, 1821 1827, 1833, 1844 1866 1898 1821 Nicaragua, 1894 1828 Paraguay, 1811 1874 1892 Peru, 1821 1826 1876 Uruguay, 1876, 1891 1811 Venezuela, 1830 1826, 1848 1860, 1865 1892, 1898 1 The dates are shown for those countries that b ecame independent during the nineteenth century. Sources: Standard and Poor’s, Purcell and Kaufman (1993), Reinhart, Rogoff and Savastano (2003) and sources cited therein. 24

27 Next we turn to the twentieth century. Table 4 shows defaults in Africa and Asia, es. Nigeria, despite its oil riches, has including among the many newly colonized countri defaulted a stunning five times since achievi ng independence in 1960, more than any other country over the same period. Indonesia has al so defaulted four times. Morocco, counting its first default in 1903 during an earlier era of independence, also defaulted four times in the twentieth century. India pr ides itself on escaping the 1990s Asian crisis (thanks to massive capital controls and fina ncial repression). In point of fact, it was forced to reschedule its external debt three times si nce independence, albe it not since 1972. While China did not default during its communist era, it did default on extern al debt in both 1921 and 1939. Thus, as Table 4 illustrates, the notion th at countries outside Latin American and low-income Europe were the only ones to default during the twentieth century is an exaggeration, to sa y the least. Table 5 looks at Latin America and Eu rope, regions where, with only a few exceptions, countries were inde pendent throughout th e entire twentieth century. Again, as in the earlier tables, we see that country defaults tend to come in clusters, including especially the period of the Great Depression, wh en much of the world went into default, the 1980s debt crisis, and also the 1990s debt crisis. The latt er crisis saw somewhat fewer technical defaults thanks to massive interven tion by the official community, particularly by the International Monetary Fund and th e World Bank. Whether these massive interventions were well advised is an entirely di fferent issue that we will set aside here. In Ecuador and Peru’s six defaults, and Brazil’s Table 5, notable are Turkey’s five defaults, seven. 25

28 , but there is some arbitrariness to this So far we have focused on number of defaults rticularly if debt re structuring terms are measure. Default episodes can be connected, pa Africa and Asia, Twentieth Century–2006 Table 4. Default and Rescheduling: Dates Country/date of 1 independence 1900–1824 1925–1949 1950–1974 1975–2006 Africa 1991 Algeria, 1962 1975 Angola, 1985 1981, 1983 Central African Republic, 1960 Cote D’Ivoire, 1983, 2000 1960 Egypt 1984 Kenya, 1963 1994, 2000 , 1956 Morocco 1903 1983, 1986 Nigeria, 1960 1982, 1986, 1992, 2001, 2004 1910 1985, 1989, 1993 South Africa, 1983 1964 Zambia, Zimbabwe, 1965 2000 1965 Asia China 1921 1939 1942 Japan 1958, 1969, 1972 1947 India, 1966 1998, 2000, 2002 1949 Indonesia, 2002 Myanmar, 1948 1947 Philippines, 1983 1980, 1982 1948 Sri Lanka, 1 e twentieth century. ecame independent during th The dates are shown for those countries that b Sources: Standard and Poor’s, Purcell and Kaufman (1993), Reinhart, Rogoff and Savastano (2003) and sources cited therein. harsh and make relapse into default almost inev itable. We have tried in Table 4 to exclude llow-on default occurs within two years of obviously connected episodes, so that when a fo an earlier one, we count it as in further perspective into one episode. However to ga look next at the number of years each country has spent in countries default histories, we default since independence. 26

29 , and Latin America, Twentieth Century–2006 Table 5. Default and Rescheduling: Europe Dates Country/date of 1 independence 1900–1824 1925–1949 1950–1974 1975–2006 Europe 1938, 1940 Austria 1932, 1939 Germany 1932 Greece Hungary, 1918 1932, 1941 1936, 1940 1981 Poland, 1918 Romania 1933 1981, 1986 Russia 1918 1991, 1998 1978, 1982 1931, 1940 1915 Turkey Latin America Argentina 1951, 1956 1982, 1989, 2001 1980, 1986, 1989 1931 Bolivia Brazil 1931, 1937 1983 1961, 1964 1902, 1914 1931 1961, 1963, 1966, 1983 Chile 1972, 1974 Colombia 1900 1932, 1935 Costa Rica 1901 1932 1962 1981, 1983, 1984 Dominican 1931 1982, 2005 Republic 1982, 1999 1929 Ecuador 1906, 1909, 1914 1921 1932, 1938 El Salvador Guatemala 1933 1986, 1989 Honduras 1981 Mexico 1914 1928 1982 1979 Nicaragua 1911, 1915 1932 Panama, 1983, 1987 1903 1932 1986, 2003 Paraguay 1920 1932 1931 1969 1976, 1978, 1980, Peru 1984 Uruguay 1915 1933 1983, 1987, 1990, 2003 Venezuela 1983, 1990, 1995, 2004 1 e twentieth century. ecame independent during th The dates are shown for those countries that b Sources: Standard and Poor’s, Purcell and Kaufman (1993), Reinhart, Rogoff and Savastano (2003) and sources cited therein. and Africa in Table 6. Table 6 gives, We begin by tabulating the results for Asia the total number of reschedulings (using our for each country, the year of independence, measure) and the share of years since 1800 (or since independence, if more recent) spent in ng. It is notable that, while th a state of default or rescheduli ere are many defaults in Asia, 27

30 Table 6. The Cumulative Tally of Default and Rescheduling: Africa and Asia, Year of Independence–2006 Year of Independence Share of years in default Country Total number of defaults or rescheduling since and/or reschedulings 1 independence or 1800 Africa 1962 13.3 1 Algeria Angola 1975 59.4 1 Central African 1960 53.2 2 Republic Cote D’Ivoire 1960 48.9 2 Egypt 1831 3.4 2 Kenya 1963 13.6 2 Mauritius 1968 0.0 0 Morocco 1956 15.7 4 Nigeria 1960 21.3 5 1910 5.2 3 South Africa Tunisia 1591/1957 5.3 1 Zambia 1964 27.9 1 1965 40.5 2 Zimbabwe Asia China 1368 13.0 2 0 0.0 Hong Kong 1947 11.7 3 India 1949 15.5 4 Indonesia Japan 1590 5.3 1 Korea 1945 0.0 0 Malaysia 1957 0.0 0 Myanmar 1948 8.5 1 Philippines 1947 16.4 1 Singapore 1965 0.0 0 1948 6.8 2 Sri Lanka Taiwan 1949 0.0 0 Thailand 1769 0.0 0 1 For countries that became independent prior to 1800 the calculations are for 1800–2006. Sources: Authors’ calculations, Standard and Poor’s, Purcell and Kaufman (1993), Reinhart, Rogoff and Savastano 2003 ( and sources cited therein. ) the typical default was resolved relatively qui ckly. Only Indonesia, India, China and the Philippines spent more than 10 percent of th eir independent lives in default (though of . Africa’s record is much course on a population-weighted basi s, that is most of the region) worse, with several countries spending roughly half their time in default. Certainly, one main reason why African defaults are less celebr ated than, say, Latin American defaults, is typically been relatively small, and the because the debts of African countries have systemic consequences less. 28

31 Table 7 gives the same set of statistics for Europe and Latin America. Greece, as noted, spent more than half the years since 1800 in default. A number of Latin American countries spent roughly 40 per cent of their years in defa ult, including Mexico, Peru, Venezuela, Nicaragua, Dominican Republic, and Cost Rica. One way of summarizing the data in Tabl es 6 and 7 is by looking at a time line giving the number of countries in default or restructuring at any gi ven time. We have already done this in Figure 1 in section II. These figures, in which spikes represent a surge in new borrowers, illustrate th e clustering of defaults in an even more pronounced fashion than our debt tables that mark first defaults. hough there is a great deal of variance, The same is true across countries, alt depending especially on how long countries tend to stay in default (compare serial-debtor Austria, which has tended to emerge form default relatively quickly, with Greece, which has lived in a perpetual state of default). Ov erall, one can see that default episodes, while recurrent, are far from continuous. This wide spacing no doubt reflects adjustments debtors and creditors make in the wake of each default cycle. For example, today, many emerging markets are following quite conservative macroeconomic policies. Over time, though, this caution usually gives way to optimism and profligacy, but only after a long lull. 29

32 Table 7. The Cumulative Tally of Default and Resche duling: Europe, Latin America, North America, and Oceania, Year of Independence–2006 Country Year of Independence Share of years in default Total number of defaults or rescheduling since and/or reschedulings 1 independence or 1800 Europe Austria 1282 17.4 7 Belgium 1830 0.0 0 Denmark 980 0.0 0 Finland 1917 0.0 0 France 943 0.0 8 Germany 1618 13.0 8 Greece 1829 50.6 5 Hungary 1918 37.1 7 Italy 1569 3.4 1 Netherlands 1581 6.3 1 Norway 1905 0.0 0 Poland 1918 32.6 3 Portugal 1139 10.6 6 Romania 1878 23.3 3 Russia 1457 39.1 5 Spain 1476 23.7 13 Sweden 1523 0.0 0 Turkey 1453 15.5 6 1066 0.0 0 United Kingdom Latin America 1816 32.5 7 Argentina Bolivia 1825 22.0 5 Brazil 1822 25.4 9 Chile 1818 27.5 9 Colombia 1819 36.2 7 Costa Rica 1821 38.2 9 1845 29.0 7 Dominican Republic 1830 58.2 9 Ecuador El Salvador 1821 26.3 5 Guatemala 1821 34.4 7 Honduras 1821 64.0 3 Mexico 1821 44.6 8 Nicaragua 1821 45.2 6 Panama 1903 27.9 3 Paraguay 1811 23.0 6 Peru 1821 40.3 8 Uruguay 1811 12.8 8 Venezuela 1830 38.4 10 North America Canada 1867 0.0 0 United States 1783 0.0 0 Oceania Australia 1901 0.0 0 New Zealand 1903 0.0 0 1 For countries that became independent prior to 1800 the calculations are for 1800–2006. Sources: Authors’ calculations, Standard and Poor’s, Purcell and Kaufman (1993), Reinhart, Rogoff and Savastano (2003) and sources cited therein. 30

33 V. Global Cycles and External Defaults have demonstrated for the post-war As Kaminsky, Reinhart and Vegh (2004) have recently modeled, emerging market period, and Aguirre and Gopinath (2007) vorable trends in countries’ terms of trade borrowing tends to be extremely pro-cyclical. Fa (meaning typically, high prices for primary co mmodities) typically lead to a ramp-up of ices drop. The upper panel of Figure 7 is an borrowing that collapses into defaults when pr illustration of the commodity price cycle, whic h we split into two periods, the pre– and post–World War II periods. As the figure broadly suggests for the period 1800 through 1940, (and as econometric testing corroborates), spikes in commodity prices are almost invariably followed by waves of new soverei gn defaults. The lower panel of Figure 7 calibrates the same phenomenon for the 1990s and 2000s. We note that while the association does show through in the pre– World War II period, it is less compelling subsequently. As observed earlier, defaults ar e also quite sensitive to the global capital flow cycle. When flows drop precipitously, mo re countries slip into default. Figure 8 documents this association by plotting the current account ba lance of the financial center (the United Kingdom and the United States) against the numbe r of new defaults prior to the breakdown of Bretton Woods. There is a marked visual correlation between peaks in the capital flow cycle and new defaults on sovereign debt. The financial center current accounts capture “global savings glut” pressures, as they give a net measure of excess center-country savings, rather than the gross measure given by the capital flow seri es in our dataset. 31

34 Figure 7. Commodity Prices and New External Defaults 1800–1939 World commodity prices, 0.6 18 deviation from trend, 16 3-year average 0.4 14 (i h i) Number of new defaults 0.2 12 year sum - 3 10 0 Index level 8 N um ber of countries -0.2 6 4 -0.4 2 0 -0.6 1860 1870 1820 1880 1890 1900 1910 1920 1930 1810 1830 1840 1850 1800 1940–2006 0.5 14 Number of new defaults ear sum (left axis) 3- y 0.4 12 0.3 10 0.2 Index level Number of countrie s 8 0.1 World commodity prices, 6 deviation from trend 0 ear average y 3- 4 (right axis) -0.1 2 -0.2 -0.3 0 1970 1960 1990 2000 1980 1940 1950 World Economic Outlook, Gayer, Rostow, and Schwartz (1953), The Economist, Sources: Boughton (1991), IMF and the authors’ calculations based on the sources listed in Table AI.9. For external default, see Appendix I. default. Because of the ma rked negative downward drift Notes: New external defaults refer to the first year of e regressed against a linear trend, so as to isolate the in commodity prices during the sample period, prices ar cycle. 32

35 Figure 8 Net Capital Flows from the Financial Center and Default 1818-1968 18 30 UK and US Current account balance, 16 25 3-year sum as a percent of GDP 14 ri ) ht axis g ( 20 Number of new defaults 12 ear sum y 3- 15 10 Percent 8 10 N um ber of countries 6 5 4 0 2 0 -5 1918 1928 1938 1838 1868 1878 1888 1898 1908 1858 1828 1818 1848 Sources: Historical Statistics of the United States (20 07), Imlah (1958), Mitchell (1993), Bank of England. Notes: The current account for the UK and the US is de fined according to the relative importance (albeit in a tries as the financial centers and primary suppliers of capital to the rest simplistic arbitrary way) of these coun 3 UK receives a weight of 1 (US, 0); 191 4–1939 both countries’ current accounts are of the world: 1800–191 receives a weight equal to 1. equally weighted; post-1940, US We recognize that the correla tions captured by these figures are merely illustrative, and different default episodes involve many di fferent factors. But aside from illustrating the kind of insights one can get from such a long and broad dataset, the figures do bring into sharp relief the vulnerabilities of emer ging markets to global business cycles. The problem is that crisis-prone countries, particul arly serial defaulters, tend to over-borrow in good times, leaving them vulnerable during the in evitable downturns. The pervasive view that “this time is different” is precisely why it usually isn’t di fferent, and catastrophe eventually strikes again. The capital flow cycle illustrated in Fi gure 8 comes out even more strikingly in many individual country graphs, but we do not ha ve space here to include these. An early 33

36 example, though, is illustrated in Figure 9, ba ury Spain. The figure sed on seventeenth-cent illustrates how defaults often follow in the wake of large spikes in capital inflows. Figure 9 Spain: Defaults and Loans to the Crown, 1601- 1679 (3-year moving sum) 35 Defaults of 1607, 1627, and 1647 30 25 20 15 Millions ducats 10 5 0 1600 1606 1612 1618 1624 1630 1636 1642 1648 1654 1660 1666 1672 1678 Sources: Gelabert (1999a and b), European State Finance Database . Crises Emanating from the Center We have already seen that major global sp ikes in defaults began in the 1820s, the 1870s, the 1930s and the 1980s. The 1930s spike was caused by the worldwide depression that, by most accounts, began in the United Stat es. So, too, did the 1980s spike, which was caused by U.S. disinflation. What of earlier eras? Tables 8 and 9 give a thumbnail summary of events, showing how the 1825 crisis began with a financial crisis in London that spread to Europe, causing global trade and capital flows to plummet. This summary of events, of course, is silent as to the magnitude of the intern ational transmission channel, but the tables are nevertheless illustrative of so me of the common shocks that might have es seen in the figures in the preceding sparked the commodity and capital flow cycl 34

37 and Their International Repercussions: Table 8. Crises at the Financial Center 1800’s Countries affected Nature of common Origin of the shock: Contagion external shock mechanisms country and date London, 1825–1826 Major commercial and Chile and Gran Colombia Upon Peru’s 1826 (which comprised today’s default, London bond financial crises in London Colombia, Ecuador, and holders immediately during 1825–26, which become concerned Venezuela) default later spread to continental in the year. By 1828, all Europe. Trade and capital about other Latin flows with Latin America of Latin America, with American countries’ plummet. the exception of Brazil, ability to service their had defaulted. debts; bond prices collapse. Crisis spreads quickly to Capital flows to the German and Austrian French war indemnity paid Italy, Holland, and U.S. fall in the wake of stock markets collapse, to Prussia in 1871 leads to Belgium, leaps the German crisis speculation in Germany and May 1873 Atlantic in September and (Kindleberger 1989). Austria. As far as the crosses back again to Ensuing world periphery is concerned, the involve England, France, recession (1873–1879) world recession (1873– and Russia (Kindleberger, leads to debt servicing 1879) results in a dramatic 2000). By 1876, the problems in the fall in trade and capital Ottoman Empire, Egypt, periphery through flows originating in the Greece, and 8 Latin reduced exports and tax core. American countries had revenues. Initial defaulted. defaults in small Central American nations in January 1873 leads to a fall in bond prices. Strong economic links Argentina stops dividend Baring Crisis, 1890 Crisis mostly confined to payments in April 1890, between Britain and Argentina and Uruguay Argentina through trade leading to a domestic bank (which defaulted in 1891). and financial run. The House of Baring, a integration. major lender to Argentina, declares itself insolvent in November 1890. sections. Other examples where crises in the center lead to global financial crises include the German and Austrian stock market co llapse of 1873 (which has been studied by ourse, the Wall Street stock market crash of Eichengreen in several contributions) and, of c 1929. It is also notable that cr ises in the center do not alwa ys lead to full-blown global crisis of 1890 (where th financial crises, as illustrated by the Barings e repercussions were 35

38 mainly felt by Argentina and Uruguay), as well as by the US stock market crash and bank runs of 1907, which transmitted mainly to Germany, France and Italy. Domestic Debt So far, we have focused on external debt crises, but not yet looke d at domestic debt buildups. Some have argued that external defaults are less likely in the present period because governments are now relying more on domestic debt. For example, in 2001 to 2005, domestic government debt in Mexico and Co lombia accounted for more than 50 percent of total debt, as opposed to less than 20 percent in the ear ly 1980s. But this is not new. In 1837, in the midst of one of Mexico’s longer de fault spells, domestic debt amounted to 64 percent of total public debt. set has domestic debt statistics The earliest year where our data for Colombia is 1923, when domestic debt accounted for 54 percent of total debt. During rcent of Brazil’s de bt and 63 percent of the same year, domestic debt accounted for 52 pe Peru’s debt. The 1920s, of course, was a peri od prior to the massive wave of external defaults in the 1930s, a fact that ought to be looked at more clos ely by those who believe that the recent shift by emer ging markets towards domestic debt, and away from external debt, somehow provides strong protection to creditors. Figure 10 makes this point more systematically by examining the behavior of domestic and external sovereign debt in the run-up to default. The bars give the average experience of both types of debt, normalized by their levels four years prior to the credit rapidly, at about the same rates, just before event. As can be seen, both components rise default. 36

39 But domestic debt buildups often happen in the aftermath of external default, precisely because countries have difficulty borrowing abroad. Figure 11 illustrates the case of China, which had a massive run-up in domestic debt following its default of 1921. 37

40 Figure 10 The Runup in Domestic and External Debt on the Eve of Default, Average Default Episode: 1800-2006 150 Domestic 140 130 External 120 . Index 110 t-4=100 100 90 t-4 t-3 t-2 t-1 T Sources: See Appendix I and Reinhart and Rogoff (2008a). T Notes: refers to the year of the external debt crisis. Figure 11 China: Domestic Public Debt Outstanding, 1895-1946 The default of 14000 1949 - 1939 12000 The default of 10000 1921-1936 8000 6000 Millions Chinese $ (yuan) 4000 2000 0 1895 1899 1903 1907 1911 1915 1919 1923 1927 1931 1935 1939 1943 Sources: Cheng (2003), Huang (1919), UN and authors’ calculations. Notes: For 1895–1915 the debt stock is calculated from domestic debentures data. According to Huang, China did not have domestic debt prior to its 1895 domestic issue. 38

41 We have already acknowledged that domestic debt is not equivalent to foreign debt, also established that domestic debt has long nor should it be treated as such. But we have been fully as significant as external debt in meeting emerging market financing needs. There is nothing “original” about it. And as we show in Reinhart and Rogoff (2008a), defaults on domestic debt appear to be associated with sim ilar magnitudes of output loss as defaults on external debt. VI. Default through inflation ry passing through the emerging market state If serial default is the norm for a count of development, then the tendency to laps e into periods of high and extremely high inflation is an even more striking common de nominator. No emerging market country in history, including the United States (whose infl ation rate exceeded 20 percent during the country’s 1860s civil war) has managed to escape bouts of high inflation. Of course, the problems of external defau lt, domestic default and inflation are all integrally related. A government that chooses to hardly be relied on default on its debts can to preserve the value of its country’s currenc y. Money creation and interest costs on debt all enter the government’s budget constraint and, in a funding crisis, a sovereign will typically grab from any and all sources. In this section, we give an overview of results from our annual cross-country th -century Europe. We are onl y able here to give a database on inflation going back to 13 helicopter tour (so to speak) of our entire cross-country in flation dataset which, to our knowledge, spans considerably more episodes of high inflation and across a broader range of countries than any existing. Although some writers seem to believe th at inflation only really became a problem with the advent of paper currency in the 1800s , students of the history of metal currency 39

42 will know that governments found ways to engin eer inflation long before that. The main device was through debasing the content of th e coinage, either by mixing in cheaper metals, or by shaving down coins and reissui ng smaller coins in the same denomination. Modern currency presses are just a more te chnologically advanced and more efficient approach to achieving the same end. Tables 9 and 10 give data on curren cy debasement acro ss a broad range of European countries during th e pre–paper currency era, 1228–1799. The table illustrates how strikingly successful monarchs were at implementing inflationary monetary policy. Sweden achieved a debasement of 41 per cent in a single year (1572), while the UK achieved a 50 percent debasement in 1551; Turkey ’s debasement was 44 percent in 1586. The second column of the table looks at cumulative currency debasement over long periods, often adding up to 50 pe rcent or more. Table 10 look s at the same statistics for European countries during th e nineteenth century, where outliers include Austria’s 55 percent debasement in 1812, and Russia’s 57 pe rcent in 1810, both in th e aftermath of the Napoleonic War. Turkey, in 1829, managed to reduce the silver cont ent of its coins by 50 percent. The pattern of sustained debasement em erges strikingly in Figure 12, which plots the silver content of an equally weighted aver age of the European currencies in our early h Toward Fiat Money” shows that modern sample (plus Russia and Turkey). “The Marc inflation is not as different as some might believe. 40

43 Figure 12. The March Toward Fiat Money: Europe 1400-1850 10 Average Silver Content (in grams) of 10 Currencies 9 8 Napoleonic Wars, 1799- 7 1815 6 in 1812 Austria debases 5 currency by 55% Grams 4 3 2 1 0 1650 1700 1750 1800 185 1400 1450 1500 1550 1600 0 Sources: Primarily Allen and Unger and other sources listed in Table AI.4. Notes: In the cases where there is more than one curren cy circulating in a particular country (in Spain, for example, we have the New Castille maravedi and the Valencia dinar) we calculate the simple average. 41

44 Table 9. Expropriation through Curre ncy Debasement: Europe, 1258–1799 Cumulative Share of years in which there was Period covered decline in a debasement of the currency (i.e. Country and Largest debasement a reduction in the silver content) currency silver content of currency (percent) ( percent) and year All 15 percent or greater 1371–1499 –69.7 –11.1 1463 25.8 0.0 Austria Vienna kreuzer 1500–1799 –59.7 –12.5 1694 11.7 0.0 1349–1499 –83.8 –34.7 7.3 3.3 Belgium 1498 1561 hoet 1500–1799 –56.3 –15.0 4.3 0.0 1258–1499 –74.1 –56.8 1303 6.2 0.4 France livre tournois 1500–1789 –78.4 –36.2 1718 14.8 1.4 Germany 1424 3.7 1.2 Bavaria– 1417–1499 –32.2 –21.5 Augsburg 3.7 1.0 1500–1799 –70.9 –26.0 1685 pfenning 1350–1499 –14.4 –10.5 1404 2.0 0.0 Frankfurt 2.0 0.3 pfenning 1500–1798 –12.8 –16.4 1500 1280–1499 –72.4 –21.0 Italy lira 5.0 0.0 1320 fiorentina 1500–1799 –35.6 –10.0 1550 2.7 0.0 Netherlands 1366–1499 –44.4 –26.0 1488 13.4 5.2 Flemish grote 1500–1575 –12.3 –7.7 1526 5.3 0.0 1450–1499 –42.0 –34.7 1496 14.3 6.1 Guilder 1500–1799 –48.9 -15.0 4.0 0.0 1560 Portugal reis 1750–1799 -25.6 –3.7 1766 34.7 0.0 –14.3 Russia ruble 1761–1799 –42.3 1798 44.7 0.0 Spain 1501–1799 –62.5 –25.3 1642 19.8 1.3 New Castille maravedis 1408 2.0 0.0 Valencia dinar 1351–1499 –7.7 –2.9 1501 1500–1650 –20.4 –17.0 13.2 0.7 Sweden mar 20.0 12.0 1523–1573 –91.0 –41.4 1572 ortug Turkey Akche 1527–1799 –59.3 –43.9 1586 10.5 3.1 United 1260–1499 –46.8 –20.0 1464 0.8 0.8 Kingdom 2.3 1.3 1500–1799 –35.5 –50.0 1551 pence other sources listed in Table AI.4. Sources: Primarily Allen and Unger and 42

45 Table 10. Expropriation through Currency Debasement: Europe, the Nineteenth Century Share of years in which there Cumulative was a debasement of the Country Period Largest decline in currency (i.e. a reduction in covered silver content debasement the silver content) of currency (percent) and (percent) year All 15 percent or greater Austria 1800–1860 –58.3 –55.0 37.7 11.5 1812 Germany 1800–1830 –2.2 –2.2 3.2 0.0 1816 Italy 1800–1859 0.0 0.0 0.0 0.0 Portugal 1800–1855 –12.8 –18.4 57.1 1.8 1800 Russia 1800–1899 –56.6 –41.3 50.0 7.0 1810 7.0 7.0 Turkey 1800–1899 –83.1 –51.2 1829 United 1.0 0.0 1800–1899 –6.1 –6.1 1816 Kingdom Sources: Primarily Allen and Unger and other sources listed in Table AI.4. Inflation However spectacular some of the coinage debasements reported in Tables 9 and 10, there is no question that the advent of the pr inting press brought inflation up to a whole new level. Figure 12 illustrates the median inflat ion rate for all the countries in our sample, from 1500 to 2006 (taking a five-year moving average to smooth out cycle and measurement error). The figure shows a cl ear inflationary bias throughout history (although of course there are alwa ys periods of deflation due to business cycles, poor crops, however, inflation spikes radically. etc.). Starting in the twentieth century, 43

46 Figure 13 Median Inflation Rate All Countries 5-Year Moving Average: 1500-2006 14 12 10 8 6 4 Percent 2 0 1750 1600 1550 2000 1650 1700 1500 1800 1850 1900 1950 -2 -4 Sources: There are innumerable sources given the length of the period covered and the large number of countries included. These are listed in Table AI. centuries in the next three tables. Table We look at country inflation data across the 11 gives data for the sixteenth th a broad range of currencies. rough nineteenth century over What is stunning is that ever y country in both Asia and Euro pe experienced a significant number of years with inflati on over 20 percent during this era, and most experienced a significant number of years with inflation over 40 percent. Take Korea, for example, where our dataset begins in 1743. Korea expe rienced inflation of over 20 percent almost half the time until 1800, and inflation over 40 pe rcent almost one-third of the time. Poland, where the data go back to 1704, has extremely similar ratios. Even the United States experienced an episode of very high inflation, as inflation peaked at nearly 200 percent five percent in 1779. The New World colonies of Latin America experienced frequent bouts of very high inflation long be fore the wars of independence from Spain. 44

47 Table 11. “Default” through Inflation: As ia, Europe, and the “New World” 1500–1799 Year of Maximum Share of years in which Number of Period 1 peak annual hyperinflations inflation exceeded covered Country inflation inflation 40 percent 20 percent Asia 14.3 0 China 116.7 6.2 1651 1639-1799 0 Japan 1601-1650 34.0 14.0 98.9 1602 0 143.9 1787 Korea 1743-1799 43.9 29.8 Europe Austria 1501-1799 8.4 6.0 0 99.1 1623 Belgium 1501-1799 25.1 11.0 0 185.1 1708 Denmark 1749-1799 18.8 0 77.4 1772 10.4 France 1501-1799 12.4 2.0 0 121.3 1622 Germany 1501-1799 10.4 3.4 0 140.6 1622 Italy 1501-1799 19.1 7.0 0 173.1 1527 4.0 Netherlands 1501-1799 0 0.3 40 1709 Norway 1666-1799 6.0 0.8 44.2 1709 0 0 92.1 1762 Poland 1704-1799 43.8 31.9 0 83.1 Portugal 1729-1799 19.7 2.8 1757 Spain 1501-1799 4.7 0.7 0 40.5 1521 4.1 0 65.8 1572 Sweden 1540-1799 15.5 0 Turkey 1586-1799 19.2 11.2 53.4 1621 1501-1799 5.0 1.7 United 39.5 1587 0 Kingdom The “New World” Argentina 1777-1799 4.2 0.0 0 30.8 1780 Brazil 1764-1799 25.0 4.0 0 33.0 1792 0 36.6 1763 Chile 1751-1799 4.1 0.0 Mexico 1742-1799 22.4 0 80.0 1770 7.0 Peru 1751-1799 10.2 0.0 0 31.6 1765 United 192.5 1779 1721-1799 7.6 4.0 0 States 1 Hyperinflation is defined here as an annual inflation ra te of 500 percent or higher (this is not the traditional Cagan definition). Table 12 looks at the same years 1800–2006 as Table 11, but for thirteen African countries and twelve Asian c ountries. South Africa, Hong Kong and Malaysia have notably beit South Africa’s record extends back ting high inflation, al the best track records at resis 45

48 to 1896, whereas Malaysia’s and H ong Kong’s only go back to 1949 and 1948 14 respectively. ation: Asia and Africa 1800–2006 Table 12. “Default” through Infl Year of Maximum Number of Beginning Share of years in which peak annual of period inflation exceeded hyperinflation Country 1 inflation inflation covered years 20 percent 40 percent Africa Algeria 1879 24.1 12.0 0 69.2 1947 Angola 1915 53.3 44.6 4 4,416.0 1996 27.7 1971 Central 1957 4.0 0.0 0 African Republic 1952 7.3 0.0 0 26.0 1994 Cote D’Ivoire Egypt 1860 7.5 0.7 0 40.8 1941 Kenya 1949 8.3 3.3 0 46.0 1993 Mauritius 1947 10 0.0 0 33.0 1980 Morocco 1940 14.9 4.5 0 57.5 1947 0 Nigeria 1940 22.6 9.4 72.9 1995 South 1896 0.9 0.0 0 35.2 1919 Africa 0 Tunisia 1940 11.9 6.0 72.1 1943 Zambia 1943 29.7 15.6 0 183.3 1993 1920 23.3 14.0 1,216.0 2006 Zimbabwe Asia China 1800 19.3 14.0 3 1,579.3 1947 Hong 1948 1.7 0.0 0 21.7 1949 Kong 1801 7.3 1.5 0 53.8 1943 India Indonesia 1819 18.6 9.6 1 939.8 1966 Japan 1819 12.2 4.8 1 568.0 1945 Korea 1800 35.3 24.6 0 210.4 1951 0.0 22.0 1950 Malaysia 1949 1.7 0 1872 22.2 6.7 0 Myanmar 58.1 2002 Philippines 1938 11.6 7.2 0 141.7 1943 Singapore 1949 3.4 0.0 0 23.5 1973 Taiwan 1898 14.7 11.0 29.6 1973 0 Thailand 78.5 1821 14.0 7.5 0 14 s, including for example The dates in table 13 extend back prior to inde pendence for many countrie Malaysia. 46

49 Most of the countries in Asia and Afri ca however, have experienced waves of high ian countries have been immune from Latin and very high inflation. The notion that As American–style high inflation is just as na ïve as the notion that Asian countries were te 1990s Asian financial crisis. China immune from default crises up until the la 15 , Indonesia over 900 percent in 1966. experienced over 1500 percent inflation in 1947 Even the Asian tigers Singapore and Taiwan ex perienced inflation well over 20 percent in the early 1970s. ll worse record. Angola had inflation of Africa, perhaps not surprisingly, has a sti over 4,000 percent in 1996, and Zimbabwe of over 1,000 percent in 2006. Had we extended the table through 2007, we would have picked up Zimbabwe’s 66,000 percent inflation for 2007, putting that country on track to surpass the Republic of the Congo (not included in our sample), which has experienced three hype rinflations since 1970 (Reinhart and Rogoff, 2002). Finally, Table 13 lists infl ation for 1800 through 2006 for Europe, Latin America, experiences include the great post-war North America and Oceana. The European hyperinflations studied by Cagan (1956). But even setting aside the hyp erinflations, we see that countries such as Poland, Russia a nd Turkey experienced high inflation an extraordinarily large percent of the time. Norway had 152 percent inflation in 1812, Denmark 48 percent inflation in 1800, and Sw eden 36 percent inflation in 1918. Latin America’s post–World War II inflation histor y is famously spectacular, as the table illustrates, with many episodes of peacetime hyperinflations in the 1980s and 1990s. 15 China, which invented the printing press well ahead of Europe, famously experienced paper-currency- created high inflation episodes in the twelfth and thir teen centuries. (See for example, Fischer, Sahay and Vegh, 2003) These episodes ar e in our database as well. 47

50 Table13. “Default” through Inflation: Europe, Latin America, Nort h America and Oceania, 1800–2006 Year of Maximum Beginning Number of Share of years in which peak annual hyperinflation inflation exceeded Country of period 1 inflation inflation covered years 20 percent 40 percent Europe Austria 1800 20.8 12.1 2 1,733.0 1922 Belgium 1800 10.1 6.8 0 50.6 1812 Denmark 1800 2.1 0.5 0 48.3 1800 Finland 1861 5.5 2.7 0 242.0 1918 France 1800 5.8 1.9 0 74.0 1946 Germany 1800 9.7 4.3 2 2.22E+10 1923 Greece 1834 13.3 5.2 4 3.02E+10 1944 Hungary 1924 15.7 3.6 2 9.63+26 1946 Italy 1800 11.1 5.8 0 491.4 1944 Netherlands 1800 1.0 0.0 0 21.0 1918 Norway 1800 5.3 1.9 0 152.0 1812 Poland 1800 28.0 17.4 2 51,699.4 1923 Portugal 1800 9.7 4.3 0 84.2 1808 Russia 1854 35.7 26.4 8 13,534.7 1923 Spain 1800 3.9 1.0 0 102.1 1808 Sweden 1800 1.9 0.0 0 35.8 1918 Turkey 1800 20.5 11.7 0 115.9 1942 United 1800 2.4 0.0 34.4 1800 0 Kingdom Latin America Argentina 1800 24.6 15.5 4 3,079.5 1989 Bolivia 1937 38.6 20.0 2 11.749.6 1985 Brazil 1800 28.0 17.9 6 2,947.7 1990 Chile 1800 19.8 5.8 0 469.9 1973 Colombia 1864 23.8 1.4 0 53.6 1882 Costa Rica 1937 12.9 1.4 0 90.1 1982 51.5 2004 1943 17.2 9.4 Dominican 0 Republic Ecuador 1939 36.8 14.7 0 96.1 2000 El Salvador 1938 8.7 0.0 0 31.9 1986 Guatemala 1938 8.7 1.4 0 41.0 1990 Honduras 1937 8.6 0.0 0 34.0 1991 Mexico 1800 42.5 35.7 0 131.8 1987 Nicaragua 1938 30.4 17.4 6 13,109.5 1987 Panama 1949 0.0 0.0 0 16.3 1974 Paraguay 1949 32.8 4.5 0 139.1 1952 Peru 1800 15.5 10.7 3 7,481.7 1990 Uruguay 1871 26.5 19.1 0 112.5 1990 Venezuela 1832 10.3 3.4 0 99.9 1996 North America Canada 1868 0.7 0.0 0 23.8 1917 24.0 United States 1.0 0.0 0 1800 1864 Oceania Australia 1819 4.8 1.1 0 57.4 1854 1980 17.2 New Zealand 1858 0.0 0.0 0 48

51 In all of Table 13, only New Zealand and Panama have no periods of inflation over s inflation rate reached 17 percent as recently as 1980, 20 percent, although New Zealand’ and Panama had 16 percent inflation in 1974. As with debt defaults, the last few year s have been a relativ ely quiescent period in terms of very high inflation, although many c ountries (including Argentina, Venezuela and 16 Many observers, following the same of course Zimbabwe) still have very high inflation. default, have concluded that “this time is different.” logic as in commenting on external ence suggests that quiet periods do not extend Perhaps, but, as with debt defaults, experi indefinitely. Exchange rate crashes Having discussed currency debasement and inflation crises, including at this late stage a long expose on exchange rate crashes seems somewhat redundant. The database on exchange rates is almost as rich as that on prices, especially if one takes into account silver-based exchange rates, and is de scribed in detail in the Appendices. In this lengthy sample inflation crises and exchange rate crises travel hand- in- hand in the overwhelming majority of episodes across time and countries (with a markedly tighter link in chronic- inflation countries). Instead, as regards exchange rate behavior, probably the most surprising evidence comes from the Napoleonic Wars, during which exchange rate instability escalated to a level that had not been seen before and was not to be seen again for nearly one hundred years. This is starkly illustrated in Fi gures 14 and 15, with the former depicting the incidence of high inflation and the latter show ing median inflation. Th e significantly higher 16 fficial” inflation rate in Argentina At the time of this writing the “o is 8 percent—informed estimates place it at 26 percent. 49

52 incidence of crashes and larger median cha nges in the more modern period are hardly a surprise. Figure 14 Curre ncy Crashe s: Share of Countrie s with an Annual Depreciation Greater than 15 Percent: 1800-2006 Napoleonic 50 Wars 40 30 20 Percent 10 0 1800 1815 1830 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 Figure 15 Median Annual Depreciation All Countries 5-Year Moving Average: 1800-2006 8 7 6 5 Napoleonic Wars 4 3 Percent 2 1 0 -1 1800 1815 1830 1845 1860 1875 1890 1905 1920 1935 1950 1965 1980 1995 -2 Sources: The primary sources are Global Financial Data, and Reinhart and Rogoff (2003), but there are numerous others that are listed in Appendix I. 50

53 VII. Varieties of Crises We deal with five “varieties” of econo mic crises: external default, domestic 17 default, banking crises, currency crashes, and inflation outbursts. All these variables take on the value of one when there is a crisis and zero otherwise. Thus, in a tranquil year the tally across crises for that pa rticular country would total ze ro, while in the worst-case scenario (Argentina 2002, for instance) it would sum to five. Hence, each country has an take simple averages across all countries, or entry each year in the 0 to 5 range. We next across countries in a particular region, and thus construct a composite index of financial instability that is multidimensional. These are the time series shown for the full sample in Figure 16 for the whole sample and for Asia. We have comparable fi gures for all the other regions. We selected Asia to highlight a point we have made earlie r on more than one occasion. Namely, that the 1997–1998 crisis was not the fi rst and that the region had several protracted bouts of economic instability by interna tional standards of the day. VIII. Conclusions This paper offers a detailed quantitative ove rview of the history of financial crises dating from the mid-fourteenth century default of Edward III of England to the present sub- prime crisis in the United States. Our st udy is based on a comprehensive new statistical dataset compiled by the authors that covers every region of the wo rld and spans several centuries. Inevitably, a database of this scale and scope, involving so many primary and secondary historical sources ll contain some errors and (that do not always agree), wi omissions, despite our best efforts. We we lcome suggestions for corrections, additions, 17 The total would come to 6 if we include currency debasement—but for this there is far less data across countries, as discussed . 51

54 will attempt to incorporate into the online and improvements of this database, which we ibution and cross-referencing. version, with appropriate attr Figure 16 Variety of Crises, Asia: 1800-2006 Average Number of Crises per Country, 5-year Average Bad 1.8 Asia 1.6 1.4 1.2 1 All Countries 0.8 0.6 Number (from 0 to 5) 0.4 0.2 Good 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 0 1 2 3 6 5 7 9 0 1 3 4 6 5 8 9 0 3 6 9 5 2 8 1 7 4 0 3 9 6 2 5 Sources: The authors’ calculations on the basis of the data reported in Appendices I and II and the crises definitions described earlier. Notes: We deal with five “varieties” of economic cris es (external default, domestic default, banking crises, currency crashes, and inflation outburs ts), and all these variables take on the value of one when there is a crisis and zero otherwise. Thus, in a tranquil year the tally across crises for that pa rticular country would total zero, while in the worst-case scenar io (Argentina 2002, for instance) it would sum to five. Hence, each country has an entry each year in the 0–5 range. We ne xt take simple averages ac ross all countries or across countries in a particular region and these are the time series shown above. Our principle aim here has been to illustra te some core features of this sweeping database, trying to bring out a few fundamental regularities. We are fully aware that, in such a broad synthesis, we are inevit ably obscuring important nuances surrounding historically diverse episodes. With these caveats in mind, this “panoram ic” quantitative overview has revealed a number of important facts. First and foremo st, we illustrate the near universality of 52

55 episodes of serial default and high inflation in emerging market s, extending to Asia, Africa, global debt crises have often radiated from and until not so long ago, Europe. We show that the center through commodity prices, capital flows, interest rates, and shocks to investor notion that today’s emerging markets are confidence. We also show that the popular breaking new ground in their extensive reliance on domestic debt markets, is hardly new. This brings us to our central theme—the “t his time is different syndrome.” There is a view today that both countries and creditors have learned from their mistakes. Thanks to better-informed macroeconomic policies and more discriminati ng lending practices, it is argued, the world is not likely to again see a majo r wave of defaults. Indeed, an often-cited reason these days why “this time it’s diffe rent” for the emerging markets is that governments there are relying more on domestic debt financing. Such celebration may be premature. Cap ital flow/default cycles have been around since at least 1800—if not before. Technology has changed, the height of humans has changed, and fashions have changed. Yet th e ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. As Kindelberger wisely titled the first chapter of his classic book “Financial Crisis: A Hardy Perennial.” On a more positive note, our paper at leas t raises the question of how a country might “graduate” from a history of serial defa ult. Although the case of seventeenth-century England has been much studied, it appears to be exceptional. It is not clear how well the institutional innovations noted by North and Weingast (1996) w ould have fared had Britain been a bit less fortunate in the many wars it foug ht in subsequent years. For example, had led in the Napoleonic War, would Britain Napoleon not invaded Russia and France prevai really have honored its debts. 53

56 Interesting recent cases include Greece and Spain, countries that appear to have forming institutions, but by serial default not only by re escaped a severe history of benefiting from the anchor of the European Un ion. Austria, too, managed to emerge from an extraordinarily checkered bankruptcy hi ation with post-war story by closer integr Germany, a process that began even before Euro pean integration began to accelerate in the s seemingly emerged from serial default 1980s and 1990s. In Latin America, Chile ha the simple expedient of running large and despite extraordinary debt pressures through s. These surpluses allowed the country to pay down its sustained current account surpluse ue graduation, of course, would mean that Chile external debt to an extremely low level. Tr ls if needed (say, to benef it from countercyclical fiscal could start raising its debt leve policy) without quickly sli pping back into problems. Mexico is an interesting case where, de spite profound failure to engage in deep institutional reform, the country stands on the verge of graduation thanks to a combination of better monetary and fiscal policy, as well as the North American Free Trade Agreement. It is an interesting questi on whether, through deeper economic integration, the United States can offer the same pull to Latin countries as the European Union has done in its early days. Of course, if history te lls us anything, it is that we cannot jump to “this time is different” conclusions. In pa rticular, concluding that count ries like Hungary and Greece will never default again because “this time is different due to the European Union” may prove a very short-lived truism. IBLIOGRAPHY B / real wages and welfare ratios of Allen, Robert C., Consumer price indices, nominal building craftsmen and labourers, 1260–1913. 54

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69 Winkler, Max, Foreign Bonds: An Autopsy , (Philadelphia: Roland Sway Co., 1933). Wynne, William H., State Insolvency and Foreign Bondhol ders: Selected Case Histories Vol. II of Governmental Foreign Bond Defaults and Debt Readjustments (London: Oxford University Press, 1951). Yousef, Tarik M., “Egypt’s Growth Perf ormance Under Economic Liberalism: A Reassessment with New GDP Estimates, 1886–1945,” Review of Income and Wealth 48, 2002, 561–579. Appendix: A Global Database with a Long-term View: Sources and Methodology This appendix presents a broad- brush description of the comprehensive database used in this study and evaluates its main sources, strengths, and limitations. Since the theme of this work is that the devil lurks in the details, further docum entation on the coverage and numerous sources for individual time series by country and by period is provided in Data Appendices I and II. Those are devoted to the macroeconomic time series used and the public debt data (which is the centerpiece of our analysis), respectively. The remainder of this appendix is organized as follows: The first section describes the compilation of the family of time series that are br ought together from different major and usually well-known sources. These series include prices, mo dern exchange rates (and earlier metal-based ones), real GDP, and exports. For the recent period, the data are primarily found in standard large- scale databases. For earlier history, we relied on individual scholars or groups of scholars—more details to follow. Next, we describe the data th at is more heterogeneous in both its sources and methodologies. These are series on government fina nces, and individual efforts to construct national accounts—notably nominal and real GDP, particularly pre-1900. The remaining two sections are devoted to describing the particulars of building a cross-country, multi-century database on public debt and its characteristics and th e various manifestations and measurements of economic crises. Those include domestic and extern al debt defaults, infla tion and banking crises, and currency crashes and debasements. The constr uction of the public domestic and external debt archeology than economics. The compilation of database can be best described as more akin to 67

70 crises episodes encompasses both mechanical rules of thumb to date a crisis as well as arbitrary events as described by the financial press and judgment calls on the interpretation of historical scholars over the centuries. I. Prices, Exchange Rates, Currency Debasement, and Real GDP 1. Prices Since an overarching theme of our analysis is to document the incidence and magnitude of various forms of expropriation or default thro ugh the ages, no such study would be complete ation. Following the rise of fiat currency, without taking stock of expropriation through infl ncy debasement. To that end, our preferred inflation became the modern-day version of curre ose relative, cost-of-living indices (as those measures are consumer price indices or their cl 18 constructed by Williamson et al. in several “regional” papers). Our data sources for the modern period are primarily the standard datab ases of the International Monetary Fund— International Financial Statistics (IFS) and World Economic Outlook (WEO) . For pre–World War II coverage (usually from the early 1900s or late 1800s), Global Financial Data (GFD) and Williamson et al., Database (OXLAD, http://oxlad.qeh.ox.ac.uk/ and the Oxford Latin American History ) are key sources. Since our analysis spans several earlier centuries, we rely on the meticulous work of a number of economic historians who have constructed such price indices item by item, most often by city rather than by country, from primary sources. In this regard, the scholars participating in the Global Price and Income History Group project at the University of California, Davis (http://gpih.ucdavis.edu/ h International Institute of Social ) and their counterparts at the Dutc 19 History (http://www.iisg.nl/hpw/ ) have been an invaluable source for prices is Europe and Asia. The complete references by author to this body of scholarly work are given in Appendix I and in the references. For colonial America, the Historical Statistics of the United States (HSUS , 18 These regional papers provided time series for numerous developing countries for the mid-1800s to pre– WWII. 19 While our analysis of inflation crises begins in 1500, many of the price series begin much earlier. 68

71 http://hsus.cambridge.org) recently updated the U.S. data, while Richard Gardner (Economic History Data Desk: Economic History of Latin America, the United States and the New World, 1500–1900, at http://home.comcast.net/~richardgarner04/ ) covers key cities in Latin America. On methodology When more than one index is available for a count ry, we work with the simple average. This is most useful when there are price series for more than one city for the same country, such as in the pre-1800s data. When no such consumer price indices are available, we turn to wholesale or the 1800s and the U.S. in the 1720s). Absent any producer prices indices (as, for example, China in composite index, we fill in the holes in coverage with individual commodity prices. This almost always takes the form of wheat prices for Europe and rice prices for Asia. We realize that a single commodity (even if it is the most important one) is a relative price, rather than the aggregate we seek, so if on any given year we have at least one consumer (or cost-of-living) price series and the price of wheat (or rice)—we do not average the two but give full weight to the composite price index. Finally, from 1980 to the present the WEO data dominates all other sources, as it enforces ancies across these price indices is, at most, uniformity—although for the recent period discrep trivial. 2. Exchange rates, modern a nd early, and currency debasement The handmaiden to inflation is, of course, currency depreciation. For post–World War II data, our primary sources for exchange rates are IFS for official rates and Pick’s Currency Yearbooks for market-based rates, as quantified and do cumented in detail in Reinhart and Rogoff (2004). For modern pre-war rates GFD, OXLAD , HSUS, and the League of Nations Annual Reports are the primary sources. These are sometimes supplemented with scholarly sources for individual countries, as described in Appendix I. Less modern are the exchange rates for the late1600s–early1800s for a handful of European cu rrencies, which are taken from John Castaing's a week (on Tuesdays and Fridays) from 1698 Course of Exchange, which appeared twice 69

72 throughout the following century or so (see European State Finance Data Base, ESFDB, on/ESFDB/frameset.html http://www.le.ac.uk/hi/b .) The earlier “silver-based” exchange rates were calculated by these authors (trivially) from the time series provided primarily by Robert Alle n (for other sources see Appendix I, Table AI.4, which lists individual authors), who constructed c ontinuous annual series on the silver content of th 20 several European currencies). The earliest series begin in the mid-13 century for Italy and England. As we describe in this append ix, these series are the foundation for dating and quantifying the “debasement crises”—the precursors of modern devaluations. 3. Real GDP To maintain homogeneity, inasmuch as possible for our large sample of countries over the course of approximately 200 years, we empl oy as a primary source Angus Maddison’s data, spanning 1820–2003 (depending on the country), and its updated version through 2006 by the Total Economy Database (TED http://www.ggdc.net/ ). GDP is calculated on the basis of PPP 1990 International Geary–Khamis dollars. TED contai ns, among other things, series on levels of real GDP, population, and GDP per capita, for up to 125 countries from 1950 to the present. These countries represent about 96 percent of the world p opulation. As the smaller and poorer countries even larger share of world GDP (99 percent). We are not in the database, the sample represents an 21 do not attempt to include in our study aggregate measures of real economic activity prior to 1800. continuously over the years, we sometimes To calculate a country’s share of world GDP found it necessary to interpolate the Maddison data. For most countries, GDP is reported only for selected benchmark years (1820, 1850, 1870, etc.). Interpolation took three forms, ranging from the best or preferred practice to the most rudimentary. When we had actual data for real GDP (from either official sources or other scholars) for pe on data is missing and riods for which the Maddis periods for which both series are available, we ran auxiliary regressions of the Maddison GDP 20 Sevket Pamuk constructs comparable series for Turkey through World War I. 21 There are exceptions. For instance, Rodney Edvinsson’s careful estimates for Sweden 1720–2000 or HSUS for the US beginning in 1790 offer a basis on which to examine earlier economic cycles and . their relation to crises 70

73 series on the available GDP series for that particular country. This allowed us to fill in the gaps for comparability and enabling us to aggregate GDP the Maddison data, thus maintaining cross-country by region or worldwide. When no other measures of GDP were available to fill in the gaps, the auxiliary regressions linked the Maddison measure of GDP to other indicators of economic activity, such as an output index or, most often, cent r which we have long ral government revenues—fo 22 continuous time series. As a last resort, if no potential regressors were available, interpolation simply connected the dots of the missing Maddison data assuming a constant annual growth rate in between the reported benchmark years. While this method of interpolation is, of course, useless from the vantage point of discerning any cyclical pattern, it still provides a reasonable measure of a particular country’s share of world GDP, as this sh are usually does not change drastically from year to year. 4. Exports 23 Though subject to chronic misinvoicing problems, the external accounts are most often available for longer periods. Misinvoicing not w ithstanding, those accounts can be considered more reliable than many other series of economic ac tivity. The series used in this study are taken from the IMF, while the earlier data come primarily from GFD and OXLAD. Official historical statistics and assorted academic studies listed in Data Appendix I complement the main databases. Trade balances provide a rough measure of the coun try-specific capital flow cycle—particularly for the earlier periods when data on capital account balan ces are nonexistent. Exports are also used to scale debt—particularly external debt. II. Government Finances and National Accounts 1. Public finances Government finances are primarily taken fro m Mitchell for the pre-1963 period and from Kaminsky, Reinhart, and Végh (2004) and sources c ited therein for the more recent period. The 22 It is well known that revenues are in timately linked to th e economic cycle. 23 See, for example, calculations in the backgro und material to Reinhart and Rogoff (2004), culty/reinhart/PartII_Dual.pdf http://www.publicpolicy.umd.edu/fa . 71

74 web pages of the central banks and finance ministri es of the many countries in our sample provide in our sample, particularly in Asia and Africa, the most up-to-date data. For many of the countries the time series on central government revenues and e xpenditures date back to the colonial period. Details on individual countr in Appendix Table AI.7. In nearly all cases, y coverage are presented the Mitchell data goes back to the 1800s, enabling us to calculate debt-to-revenue ratios for many of the earlier crises. Richard Bonney’s European State Finance Data Base (ESFDB), which brings together the data provided by many authors is an excellent s ean countries for the pre- ource for the larger Europ 1800 era, as it offers considerable detail on govern ment revenues and expenditures, not to mention extensive bibliographical references. 2. National Accounts Besides the standard sources, such as the IMF, United Nations, and World Bank, which provide data on national accounts for the post–Worl d War II period (with different starting points depending on the country), we consult other multicountry databases such as OXLAD for earlier periods. As with other time series used in th is study, the constructed national account series ars around the world, such as Brahmananda for (usually for pre–World War I) from many schol India, Baptista for Venezuela, and Yousef for Egypt, are incorporated into our collection. III. Public Debt and its Composition One would think that with at least 250 sove reign external default episodes during 1800– 2007 and at least 70 cases of default on domestic public debt (not to mention the significant economic disruption associated with these events), it would be relatively straightforward to find a 24 comprehensive long time series on public sector debt. Yet, this is not the case—far from it. Government debt is among the most elusive of economic time series. 24 These numbers are a lower bound, since they do not include the many sovereign defaults prior to 1800 and, to skim the surface, see Reinhart and Rogoff (2008). as regards domestic defaults, we have only begun 72

75 For the advanced economies, the most comp rehensive data comes from the OECD, which nce 1980. However, this data has several provides time series on general government debt si important limitations: it only includes a handful of emerging markets; for many advanced economies (France, Finland, Greece, and the U.K., to name a few), the data actually begins much much of a time series; and only total debt is later in the 1990s, which cannot be considered as ition of debt (domestic versus foreign) or its reported, with no particulars provided of the compos maturity (long-term versus short-term). To state that the IMF’s well-known World Economic 25 (WEO) database extends to public debt requires a stretch of the imagination. Outlook Data is only provided for the G-7 from 1980 onward (out of 180 countries covered in the WEO). The most comprehensive data on public debt comes from the World Bank’s Global Development Finance (GFD, known previously as the World Debt Tables). It is an improvement on the other databases in that it begins (for most countries) in 1970 and it provides extensive detail external on the particulars of debt. Yet, GFD also has serious limitations. There are no advanced economies included in the database (nor newly-indus trialized countries (such as Israel, Korea, or isons. Unlike data from the IMF and the World Singapore, for that matter) to facilitate compar etc., there is no data prior to 1970. Last, but Bank for exchange rates, prices, government finances, certainly not least, these data only cover external de bt. In a few countries, such as Panama or Côte D’Ivoire, external debt is a sufficient statistic on government liabilities, since domestic public debt levels are relatively trivial. As Reinhart a nd Rogoff (2008) illustrate, however, for most countries domestic debt accounts for an important share of total government debt. The all-country average 26 oscillates between 40 to 80 percent during 1900–2006. In search of the elusive data on total public debt, we examined the archives of the global institutions’ predecessor, the League of Nati ons, and found that this institution collected information on, among other things, public domestic and external debt in its Statistical Yearbook 25 This description comes from the IMF’s web site: “D ownload time series data for GDP growth, inflation, unemployment, payments balances, exports, imports, external debt, capital flows, commodity prices, more.” 26 States, practically all public debt is For some countries, such as the Netherlands, Singapore, and the United domestic. 73

76 (1926–1944). While, neither the IMF nor the World Bank continued this practice after the war, the newly-formed United Nations (UN) inherited the da ta collected by the League of Nations and in hed a special volume on public debt, spanning 1948 its Department of Economic Affairs, publis 1914–1946. From that time onwards the UN con tinued to collect and publish the domestic and r pre-war predecessor on an annual basis in their external debt data in the same format as thei Statistical Yearbooks pendent nations, the database expanded . As former colonies became inde accordingly. This practice continued until 1983, at which time the domestic and external public debt series were discontinued altogether. In to tal, these sources yield time series that span 1914– 1983 for the most complete cases. It covers a dvanced and developing economies. For the most long-term and short-term components. To the best part, it also disaggregated domestic debt into its of our knowledge, this data is not available elect ronically in any database, hence it required going to the original publications. This data provides th e starting point for our public debt series, which have been (where possible) extended to the period prior to 1914 and post-1983. 27 For data prior to 1914 (including several countries that were then colonies) , we consulted cal and government agencies and individual numerous sources, both country-specific statisti scholars. Data Appendix II provi des details or the sources by country and time period. When no public debt data is available prior to 1914, we proceed to approximate the foreign debt stock by reconstructing debt from individual international de bt issues. This debenture data also provide a proximate measure of gross international capital in flows. Much of the data come from scholars including Lindert and Morton, Marichal, Miller, and Wynne, among others. From these data, we 28 construct a foreign debt series (but, not total debt). This exercise allows us to examine standard debt ratios for default episodes for several newly- independent nations in Latin America as well as Greece and important defaults such as that of Ch ina in 1921, and Egypt and Turkey in the 1860s– 1870s. These data are most useful for filling holes in the external debt time series, when countries 27 For Australia, Ghana, India, Korea, South Africa, among others, we have put together debt data for much of the colonial period. 28 Flandreau and Zumer (2004) are an important data source for Europe, 1880–1913. 74

77 first tap international capital markets. Their useful ness (as measures of debt) is acutely affected by urings that introduce disconnects between the repeated defaults, write-offs, and debt restruct 29 amounts of debt issued and the subsequent debt stock. For some countries (or colonies in the earlier period) where we have only relatively recent data for total public debt, but have reliable da ta going much further back on central government revenues and expenditures, we calculate and cu mulate fiscal deficits to provide a rough 30 approximation to the debt stock. To update the data for post-1983, we mostly rely on GFD for external debt. Two very valuable recent studies facilitate the update: Jeanne and Guscina (2006) compile detailed date on the composition of domestic and external debt for 19 important emerging markets for 1980–2005; Cowan, Levy-Yeyati, Panizza, Sturzenegger (2006) perform a similar exercise for all the developing countries of the Western hemisphere for 1980–2004. Last, but certainly not least, are the official government sources themselves, wh ich are increasingly forthcoming in providing domestic debt data, often u nder the IMF’s 1996 initiative, Special Data Dissemination Standard. IV. Global variables Global variables (for lack of a better name, since this term is of fairly recent vintage) have two components: those indicators that are, indeed, global in scope—namely, world commodity prices, and country-specific key economic and financ ial indicators for the world’s financial centers during 1800–2007. For commodity prices, we have time series since the late 1700s from four different sources (see Data Appendix I). The ke y economic indicators include the current account deficit, real and nominal GDP, and short- and lo ng-term interest rates for the relevant financial center of the time (i.e., the U.K. prior to World War I and the U.S, subsequently). V. Varieties of Economic Crises and their Dates 29 Even under these circumstances, they continue to be a useful measure of gross capital inflows, as there was relatively little private external borrowing nor bank lending in the earlier sample. 30 ere this exercise was particularly useful. Indonesia prior to 1972 is a good example wh 75

78 To identify crisis episodes, we used two appr oaches, one is quantitative in nature while the events. This approach is simila r to that followed in Kaminsky other is based on a chronology of and Reinhart (1999), who used quantitative threshol ds to date currency crises and events to date banking crises. Details follow. 1. Crises defined by quantitative thresholds: currency crashes, debasement, and inflation Inflation crises Since we want to study the incidence of expr opriation in its various forms, we are not only interested in dating the beginning of an inflation or currency crisis episode but its duration as well. Many of the high-inflation spells can be best d escribed as chronic—lasting many years. In our earlier work (Reinhart and Rogoff, 2004), which classified exchange rate arrangements for the post – World War II period, we used a 12-month inflation threshold of 40 or higher percent to define a “freely falling” episode. In this study, which spans a much longer period before the widespread below 40 percent per annum were considered as creation of fiat currency, inflation rates well inflation crises. Thus, we adopt an inflation th reshold of 20 percent per annum. Median inflation of the more recent period: 0.5 for 1500–1799; rates before World War I were well below those 0.71 for 1800–1913; and 5.0 for 1914–2006. Furthermore, as the last column of Table A1 highlights, hyperinflations are of modern vintage, with Hungary 1946 holding the record in our sample. Currency crashes To date currency crashes, we follow a vari ant of Frankel and Rose (1996), who focus exclusively on the exchange rate depreciation. This definition is the most parsimonious, as it does not rely on other variables such as reserve losses and interest rate hikes. Mirroring our treatment of inflation episodes, we are not only concerned here with the dating of the initial crash (as in Frankel and Rose, 1996 and Kaminsky and Reinhart, 19 99) but with the full period in which annual rising, the largest crashes shown in Table A1 are depreciations exceed the threshold. Hardly surp 76

79 similar in timing and orders of magnitudes as th e inflation profile. The “honor” of the record currency crash, however, goes to Greece in 1944. 77

80 Table A1. Defining Crises: A Summary of Quantitative Thresholds Crisis type Threshold Period Maximum or higher. We An annual inflation rate 20 percent 173.1 Inflation 1500–1790 also examine separately the incidence of more 159.6 1800–1913 tion exceeds 40 percent extreme cases where infla 9.63E+26 1914–2006 per annum. Currency An annual depreciation versus the US dollar (or the 1800–1913 275.7 crashes relevant anchor currency—historically the UK 1914–2006 3.37E+09 or the German DM and pound, the French franc, or more. presently the euro) of 15 percent Currency A reduction in the metallic content of coins in 1258–1799 –56.8 circulation of 5 percent or more. debasement: 1800–1913 –55.0 Type I The most extreme episode in our A currency reform where a new currency replaces a Currency much-depreciated earlier currency in circulation. sample is the 1948 Chinese debasement: conversion at a rate of 3 million to 1. Type II Currency debasement The predecessor of modern inflation and foreign exchange rate crises was currency debasement during the long era when the princi pal means of exchange were metallic coins. Debasements were particularly fre quent and large during wars. In deed, drastic reductions in the silver content of the currency provided many s overeigns with their most important source of financing. Figure A1, which depicts the track r ecord for Russia and Austria during the Napolenic Wars, is indeed representative of many more episodes . Finally, we also date currency “reforms” or conversions and their magnitudes. Such ode in our sample, in effect, it is not unusual to conversions form a part of every hyperinflation epis have several conversions in quick succession. For example, in its struggle with hyperinflation, 1986 to1994. However, when it comes to the Brazil had no less than four conversions from magnitude of a single conversion, the record holde r is China in 1948, with a conversion rate of three-million to one. Conversions also follow spe lls of high (but not necessarily hyper inflation), and these cases are also included in our list of modern debasements. 78

81 Figure A1. Changes in the Silver Content of the Currency: Austria and Russia During the Napolenic Wars, 1799-1815 1775 1815 1810 1805 1800 1795 1790 1785 1765 1770 1780 20 Russian 10 ruble 0 -10 i -20 Percent -30 -40 Austrian kreuzer -50 -60 The same quantitative methodology could be app lied to date the burst of asset price bubbles (equity or real estate) that are so commonplace in the run-up to banking crises, but we do not 31 encompass such episodes in this stud y and leave it for future research. 2. Crises defined by events: banking crises and domestic and external debt defaults In this section, we describe the criteria used in this study to date banking crises, external debt crises, and their little known or unders tood domestic debt crises counterparts. Banking Crises With regard to banking crises, our analysis st resses events. The main reason for following this approach has to do with the lack of long tim e series data that allows us to date banking or 31 See Kaminsky and Reinhart (1999) for the construction of thresholds to date equity price crashes and Reinhart and Rogoff (2008) for a depiction of the behavior of real estate prices on the eve of banking crises in industrialized economies. 79

82 financial crises quantitatively along the lines of in flation or currency crashes. For example, the relative price of bank stocks (or financial institu tions relative to the market) would be a logical indicator to examine. However, this is problematic , particularly for the earlier part of our sample as well as for developing countries (where many domest ic banks do not have publicly traded equity). If the beginning of a banking crisis is marked by bank runs and withdrawals, then changes in bank deposits could be used to date the crises. This indicator would have certainly done well in dating the numerous banking panics of the 1800s. Often, however, the banking problems do not arise from the liability side, but from a protracted deterioration in asset quality, be it from a collapse in real estate prices or increased bankruptcies in th e nonfinancial sector. In this case, a large increase in bankruptcies or nonperforming loans could be used to mark the onset of the crisis. Indicators of business failures and nonperforming loans are also usually available sporadically, if at all; the latter are also made less informative by ba nks’ desire to hide their problems for as long as possible. crisis by two types of events: (1) bank runs Given these data limitations, we mark a banking that lead to the closure, merging, or takeover by the public sector of one or more financial institutions (as in Venezuela in 1993 or Argentina in 2001); and (2) if there are no runs, the closure, merging, takeover, or large-scale government assist ance of an important financial institution (or group of institutions), that marks the start of a string of similar outcomes for other financial institutions (as in Thailand 1996–97). We rely on existing studies of banking crises and on the financial press; according to these studies the frag ility of the banking sector was widespread during these periods. Many country-specific studies (such as Camprubi, 1957, for Peru; Cheng, 2003, and McElderry, 1976, for China; and Noel, 2002, for Mexico) pick up banking crisis episodes not covered by the multicountry literature and contribute importantly to this chronology, but the main sources for cross-country dating of crises are as follows: For post-1970, the comprehensive and hich the authors updated through 2003—is well-known study by Caprio and Klingebiel—w 80

83 comes to classifying banking crises into systemic or more benign authoritative, especially when it nd Jacome (2008) for Latin America round out the categories; Kaminsky and Reinhart (1999), a (1989), Bordo et al. (2001), and Willis (1926) sources. For pre–World War II, Kindleberger provide multicountry coverage on banking crises. ons of this event-based dating approach to We relegate a summary discussion of the limitati Table A2, while the years in which the banking cr ises began are listed in Table A3—unfortunately, for many of the early episodes it is difficult to ascertain how long the crisis lasted. Table A2. Defining Crises by Events: A Summary Type of Crisis Comments Definition and/or Criteria This approach to dating the beginning of a We mark a banking crisis by two types banking crisis is not without drawbacks. It of events: (1) bank runs that lead to the Banking crisis could date a crisis too late, because the closure, merging, or takeover by the financial problems usually begin well before Type I: public sector of one or more financial a bank is finally closed or merged; it could systemic/severe institutions; and (2) if there are no runs, also date a crisis too early, because the worst Type II: the closure, merging, takeover, or part of a crisis may come later. Unlike the financial large-scale government assistance of an external debt crises (see below), which have distress/ milder important financial institution (or group well-defined closure dates, it is often difficult of institutions), that marks the start of a or impossible to accurately pinpoint the year string of similar outcomes for other in which a crisis ended. financial institutions. While the time of default is accurately A sovereign default is defined as the Debt crises: classified as a crisis year there are a large failure to meet a principal or interest External payment on the due date (or within the number of cases where the final resolution specified grace period). The episodes with the creditors (if it ever did take place) also include instances where seems interminable. Fort his reason we also rescheduled debt is ultimately work with a crisis dummy that only picks up extinguished in terms less favorable the first year. than the original obligation. There is at best some partial documentation The definition given above for external Debt crisis: debt applies. In addition, domestic debt of recent defaults on domestic debt provided Domestic crises have involved the freezing of by Standard and Poors. Historically, it is very bank deposits and or forcible difficult to date these episodes and in many cases (like banking crises) it is impossible to conversions of such deposits from ascertain the date of the final resolution. dollars to local currency. 81

84 External Debt C rises lt on payment of external debt obligations External debt crises involve outright defau fault), repudiation (as in Mexico 1867, when an (Argentina 2001 holds the record for the largest de over 100 million pesos of debt, issued by Maxi millian, was repudiated by the Juarez government), to the lender than those in the original contract or the restructuring of debt into terms less favorable (for instance, India’s little-known extern al restructurings in 1958–1972. These events have received considerable atte ntion in the academic literature from leading Bordo, Barry Eichengreen, Marc Flandreau, modern-day economic historians, such as Michael 32 Lindert and Morton, and Alan Taylor. Relative to early banking crises (not to mention domestic the literature) much is known about the causes and debt crises—which have been all but ignored in e dates of sovereign defaults and restructurings consequences of these rather dramatic episodes. Th are those listed in Tables 2–5. For post-1824, the dates come from several Standard and Poors studies. However, these are incomplete, missing numerous post-war restructurings and early defaults so this source has been supplemented w ith additional information from Lindert and Morton (1989), MacDonald (2003), Purcell and Kaufman (1993), Suter (1992), and Tomz (2007). Of course, required reading in this field includes Winkler (1933) and Wynne (1951). Methodology While the time of default is accurately classified as a crisis year there are a large number of cases where the final resolution with the creditors (if it ever did take place) seems interminable. ution holds the record, lasting 69 years. Greece’s default in Russia’s default following the revol s for 53 consecutive years, while Honduras’s 1873 1826 shut it out from international capital market 33 default had a comparable duration. Looking at the full default episode is, of course, useful for hazard rates, etc. But it is hardly credible characterizing the borrowing/default cycles, calculating that a spell of 53 years could be c onsidered a crisis—even if they we ren’t exactly prosperous years. Thus, in addition to constructing the country-speci fic dummy variables to cover the entire episode, 32 ars that have worked on historical sovereign defaults. This is not meant to be an exhaustive list of the schol 33 At present, Honduras remains in default since 1981, 27 years. 82

85 we also employ two other qualitative variables. The first of these only enters as a crisis the year of tered on the default date. The rationale is default; while the second creates a seven-year window cen that neither the three years that precede a default nor the three years that follow it can be considered and Rogoff (2008), this allows us to analyze the a “normal” or “tranquil” period. As in Reinhart behavior of various econom ic and financial indicators surrounding the crisis. Domestic Debt Crises Information on domestic debt crises is scarce but it is not because these crises do not take place. Indeed, as Reinhart and Rogoff (2008) sh ow, domestic debt crises typically take place against much worse economic conditions than the av erage external default. Usually domestic debt crises do not involve external creditors, perhaps th is may help explain why so many episodes go unnoticed. Of course, this is not always the case, Mexico’s much-publicized near-default in 1994– 1995 would have been a “famous” domestic de fault crisis indeed, since the dollar-linked government debt, the Tesebonos, that were on the ve rge of default, were issued under domestic law and were part of domestic debt. One can only sp eculate that if the Tesobonos had not been so widely held by nonresidents, perhaps this crisis would have received less attention. Since 1980, Argentina has defaulted three times on its domestic debt—the two defaults that coincided with defaults in external debt (1982 and 2001) did attract considerable international attention. The large- scale 1989 default that did not involve a new de fault on external debt and did not involve nonresidents is scarcely known in the literature. Even the many defaults on domestic debt during the Great Depression in advanced economies a nd developing ones are not well documented. Another feature that characterizes domestic de faults is that references to arrears or suspension of payments on domestic debt are often relegated to footnotes. Lastly, some of the domestic defaults that involved the forcible c onversion of foreign currency deposits into local perinflations, or a combination of the two currency have occurred during banking crises, hy (Bolivia, Peru, and Argentina are in this list). 83

86 The approach toward constructing categorical variables follows that previously described for external debt default. Like banking crises a nd unlike external debt defaults, for many episodes of domestic default the endpoint for the crisis is not well known. 84

87 Table A3. Banking Crises Dates and Capital Mo bility: 1800-2007 Low Income High-Income Middle Income BeginningYear BeginningYear BeginningYear Country (ies) Country (ies) Country (ies) Capital Mobility: Low-Moderate, 1800-1879 France 1802 France 1805 UK 1810 UK 1815 Denmark 1813 US 1818 UK, US 1825 US 1836 1837 Canada, UK UK 1847 Belgium 1848 1857 India 1863 UK, US 1866 Italy, UK 1873 Austria, US 1873 Peru South Africa 1877 Capital Mobility: High, 1880-1914 Germany 1880 France 1882 Mexico 1883 US 1884 Denmark 1885 Italy 1887 France 1889 Portugal, UK, 1890 1890 Argentina, Brazil, Chile, US South Africa Germany, 1891 Italy, Portugal Australia 1893 Netherlands, 1897 Sweden 1898 Chile Norway 1899 Finland 1900 Brazil 1900 Germany, 1901 Japan Denmark, 1907 Mexico 1907 France, Italy, Japan, Sweden, US Chile 1908 Mexico 1913 India 1913 Belgium, 1914 1914 Argentina, Brazil France, Italy, Japan, Netherlands, Norway, UK, US Capital Mobility: Low, 1915-1919 Chile 1915 85

88 Table A3. Banking Crises Dates and 1800–2007 (continued) Capital Mobility: Low Income High Income Middle Income Country (ies) BeginningYear Country (ies) BeginningYear Country (ies) BeginningYear Capital Mobility: Moderate, 1920–1929 Portugal 1920 Mexico 1920 1921 1921 Finland, Italy, India Netherlands, Norway 1923 China 1923 Canada, Japan, Taiwan Austria 1924 1925 Brazil, Chile Belgium, 1926 Germany Japan, Taiwan 1927 US 1929 Brazil, Mexico 1929 India 1929 Capital Mobility: Low, 1930–1969 France, Italy 1930 Belgium, 1931 1931 Argentina, Brazil, China Finland, Germany, Greece, Portugal, Spain, Sweden Belgium 1934 Argentina, 1934 China Italy 1935 Brazil 1937 Belgium, 1939 Finland India 1947 Brazil 1963 Capital Mobility: Moderate, 1970–1979 Uruguay 1971 UK 1974 Chile 1976 Central African 1976 Republic 1977 Germany, 1977 South Africa Israel, Spain Venezuela 1978 86

89 Table A3. Banking Crises Dates and Ca -2007 (continued) pital Mobility: 1800 Low Income High-Income Middle Income BeginningYear BeginningYear Country (ies) Country (ies) BeginningYear Country (ies) Capital Mobility: High, 1980-2007 1980 Argentina, Chile, Ecuador, Egypt, 1981 Mexico, Philippines Uruguay 1982 Hong Kong, 1982 , 1982 Colombia Congo (Dem. Singapore Turkey Ghana Rep.), Canada, Korea, 1983 1983 1983 Morocco, Equatorial Peru, Kuwait Guinea, Niger Taiwan Thailand Mauritania 1984 1984 UK, US 1985 1985 Guinea, Argentina, Brazil, Kenya Malaysia 1986 1987 Denmark, New 1987 1987 Bolivia, Bangladesh, Zealand, Cameroon, Mali, Norway Costa Rica, Mozambique, Nicaragua Tanzania 1988 1988 Lebanon, Benin, Panama Burkina Faso, Central African Republic , Cote D’Ivoire, Madagascar, Nepal, Senegal Australia 1989 1989 Argentina, El Salvador , South Africa, Sri Lanka Italy 1990 1990 1990 Algeria, Sierra Leone Brazil, Egypt, Romania 1991 1991 1991 Georgia, Djbouti, Czech Hungary, Liberia, Sao Republic, Poland, Tome Finland, Greece, Slovak Sweden, UK Republic 1992 1992 1992 Angola, Chad, Japan Albania, Bosnia- China, Congo, Herzegovina , Kenya , Nigeria Estonia, Indonesia Slovenia, 1993 , Cape Verde 1993 Guinea, Eritrea , India, Venezuela Macedonia Kirgyz Republic , Togo 87

90 1800–2007 (continued) Capital Mobility: Table A3. Banking Crises Dates and High Income Middle Income Low Income BeginningYear Country (ies) BeginningYear Country (ies) Country (ies) BeginningYear Capital Mobility: High, 1980–2007 1994 France 1994 Armenia, 1994 Burundi, Bolivia, Congo (Rep.), Uganda Bulgaria, Costa Rica, Jamaica, Latvia, Mexico, Turkey UK 1995 Argentina, 1995 1995 Guinea-Bissau, Azerbaijan, Zambia, Zimbabwe Brazil, Cameroon, Lithuania, Paraguay, Russia, Swaziland, 1996 Myanmar Croatia, 1996 Ecuador, Yemen Thailand 1997 Indonesia, 1997 1997 Vietnam Taiwan Korea, Malaysia, Mauritius, Philippines, Ukraine Colombia, 1998 Ecuador, El Salvador Russia 1999 Bolivia, Honduras, Peru Nicaragua 2000 Argentina, 2001 Guatemala Paraguay 2002 Uruguay Dominican 2003 Republic Guatemala 2006 US 2007 88

91 Data Appendix I. Macro Time Series used, while a separate appendix is devoted This data appendix covers the macro time series to the database on government debt. Abbreviations of Frequently-used Sources (A dditional sources listed in tables below) DIA: Diaz (et. al) ESFDB: European Stat e Finance Data Base GFD: Global Financial Data GPIHG: Global Price and Income History Group IISH: International Institute of Social History IFS: International Financial Statistics, IMF. KRV: Kaminsky, Reinhart, and Vegh MAD: Maddison MIT: Mitchell OXF: Oxford Latin American History Database RR: Reinhart and Rogoff TED: Total Economy Database World Economic Outlook, IMF WEO: List of Tables Table AI.1 Prices: Consumer or cost-of-living indices Table AI.2 Modern Nominal Exchange Rates Table AI.3 Early Silver-based Exchange Rates Table AI.4 Silver Content of Currencies Table AI.5 Nominal and Real Gross National Product and Output Index Table AI.6 Gross National Produc t: PPP in constant dollars Central Government Expenditure and Revenue Table AI.7 Table AI.8 Total Exports and Imports Table AI. 9 Global Indicators and Financial Centers 89

92 Table AI. 1 Prices: Consumer or cost-of-living indices (unless otherwise noted) Country Sources Commentary Period covered 1869-1884 Hoffman et. al. Wheat prices Algeria 1938-2007 GFD/WEO 1914-1962 MIT Angola 1991-2007 WEO 1775-1812 Buenos Aires only Gardner Argentina 1864-1940 Williamson et. al. 1884-1913 Flandreau & Zumer 1900-2000 OXF 1913-2000 Diaz et. al. 1913-2007 GFD/WEO 1818-1850 Butlin, Vanplew, New Wales, food prices Australia GPIHG 1850-1983 Shergold, GPIHG Sidney, food 1861-2007 GFD/WEO 1440-1800 Allen Vienna Austria 1800-1914 Hoffman et. al. Wheat prices 1880-1913 Flandreau & Zumer 1919-2007 GFD/WEO 1462-1913 Allen Antwerp Belgium 1835-2007 GFD/WEO 1936-2007 GFD/WEO Bolivia 1763-1820 Garner Rio de Janeiro only Brazil Rio de Janeiro only 1830-1937 Williamson et. al. 1861-2000 Diaz et. al. 1912-2007 GFD/WEO 1867-1975 CanStat Canada 1910-2007 GFD/WEO 1956-1993 MIT Central African Republic 1980-2007 WEO Santiago only 1754-1806 Garner Chile 1810-2000 Diaz e. al. 1900-2000 OXF 1913-2007 GFD/WEO Rice prices 1500-1910 Peng China 1638-1936 Wang Rice prices 1867-1935 Hsu Wholesale prices 1926-1948, GFD/WEO 1978-2007 1863-1940 Williamson et. al. Colombia 1900-2000 OXF 1923-2007 GFD/WEO 1937-2007 GFD/WEO Costa Rica 1951-2007 GFD/WEO Cote D’Ivoire Hoffman et. al. Wheat prices 1748-1800 Denmark 1815-2007 GFD/WEO 1942-2000 OXF Dominican Republic 1980-2007 WEO 1939-2007 GFD/WEO Ecuador 90

93 Table AI.1 Prices: Consumer or cost-of-living in dices-continued (unless otherwise noted) Country Sources Commentary Period covered 1859-1941 WILL Egypt 1913-2007 GFD/WEO 1915-1999 GFD 1937-2000 OXD El Salvador 1980-2007 WEO 1860-2001 Finnish Historical Finland National Accounts 1980-2007 WEO 1431-1786 Allen France 1840-1913 1807-1935 Dick Retail prices 1840-2007 GFD/WEO 1427-1765 Allen Munich Germany 1637-1855 Hoffman et. al. Wheat prices 1820-2007 GFD/WEO 1833-1938 Kostelenos et. al. GDP deflator Greece 1922-2007 GFD/WEO 1949-2007 GFD/WEO Ghana 1938-2000 OXD Guatemala 1980-2007 WEO 1938-2000 OXD Honduras 1980-2007 WEO 1923-2007 GFD/WEO Hungary 1866-2000 Diaz et. al. India 1873-1939 Williamson et. al. 1913-2007 GFD/WEO 1820-1940 Williamson et. al. Indonesia 1948-2007 GFD/WEO 1548-1645 Allen Naples Italy 1734-1806 1701-1860 DeMaddalena Wheat prices, Milan 1861-2007 GFD/WEO 1690-1909 Jun & Lewis Rice prices in the Korea southern region of Korea 1906-1939 Williamson et. al. 1948-2007 GFD/WEO Rice prices, Osaka 1600-1650 Kimura Japan 1818-1871 Bunko Rice prices, Osaka 1860-1935 Williamson et. al. 1900-2007 GFD/WEO 1947-2007 GFD/WEO Kenya 1948-2007 GFD/WEO Malaysia 1946-2007 GFD/WEO Mauritius 91

94 Table AI.1 Prices: Consumer or dices-continued cost-of-living in (unless otherwise noted) Country Commentary Period covered Sources Zacatecas 1786-1821 Garner Mexico 1877-1940 Williamson et. al. 1918-2007 GFD/WEO 1939-3007 GFD/WEO Morocco 1870-1940 Williamson et. al. Myanmar (Burma) 1939-2007 GFD/WEO 1500-1800 Van Zanden Netherlands 1800-1913 Van Riel 1880-2007 GFD/WEO 1857-2004 Statistics New Zealand New Zealand 1980-2007 WEO 1937-2007 GFD/WEO Nicaragua 1953-2007 GFD/WEO Nigeria 1516-2005 Grytten Norway 1980-2007 WEO 1939-2000 OXD Panama 1980-2007 WEO 1938-2007 GFD/WEO Paraguay 1750-1816 Garner Potosi Lima 1790-1841 Garner Peru 1800-1873 Diaz et. al. 1913-2000 1980-2007 WEO 1899-1940 Williamson et. al. Philippines 1937-2007 GFD/WEO Hoffman et. al. Oats Prices-Warsaw 1701-1815 Poland 1816-1914 Allen Warsaw 1921-1939 GFD/WEO 1983-2007 1728-1893 Hoffman et. al. Wheat prices Portugal 1881-1997 Bordo et. al. 1980-2007 WEO 1779-1831 Wheat prices, Wallachia Hoffman et. al. Romania 1971-2007 WEO Wheat and rye flour, St. Borodkin 1853-1910 Russia Petesburg 1880-1913 Flandreau & Zumer GFD/WEO 1917-1924, 1927-1940, 1944-1972, 1991-2007 1948-2007 GFD/WEO Singapore 1895-2007 GFD/WEO South Africa 1500-1650 Hamilton Valencia Spain Wheat, eggs, and linen 1651-1800 Hamilton, Hoffman et. al. prices 1800-2000 Diaz et. al. 1980-2000 WEO 1939-2007 GFD/WEO Sri Lanka 92

95 Table AI.1 Prices: Consumer or cost-of-living indices-concluded (unless otherwise noted) Sources Commentary Country Period covered Hoffman et. al. Wheat prices 1732-1800 Sweden 1800-2000 Edvinsson 1980-2007 WEO 1897-1939 Williamson et. al. Taiwan 1980-2007 WEO 1820-1941 Williamson et. al. Thailand (Siam) 1948-2007 GFD/WEO 1939-2007 GFD/WEO Tunisia Istanbul 1469-1914 Pamuk Turkey 1854-1941 Williamson et. al. 1922-2007 GFD/WEO 1450-1999 Van Zanden Southern England United Kingdom 1781-2007 GFD/WEO Wholesale prices 1720-1789 Historical Statistics of United States the United States 1774-2003 Historical Statistics of the United States 1980-2007 WEO 1870-1940 Williamson et. al. Uruguay 1929-2000 OXF 1980-2007 WEO 1830-2002 Baptista Venezuela 1914-2007 GFD/WEO 1938-2007 GFD/WEO Zambia 1920-1970 Mitchell Zimbabwe 1930-2007 GFD/WEO 93

96 Table AI.2 Modern Nominal Exchange Rates (Domestic currency units per US dollar and other currencies noted) Country Other relevant rates Period covered Source 1831-2007 GFD/IFS French francs/euro Algeria 1921-2007 GFD/IFS Angola Flandreau & Zumer French francs 1880-1913 Argentina 1885-2007 GFD/IFS 1835-2007 GFD/IFS UK pound Australia 1814-2007 UK pound, German DM GFD/IFS Austria 1830-2007 GFD/IFS French francs Belgium 1863-2007 GFD/IFS Bolivia 1812-2007 GFD/IFS UK pound Brazil 1858-2007 GFD/IFS UK pound Canada 1900-2007 GFD/IFS French francs Central African Republic 1830-1995 Braun et. al. UK pound Chile 1878-2007 GFD/IFS 1848-2007 GFD/IFS UK pound China 1900-2000 OXF UK pound Colombia 1919-2007 GDF/IFS 1921-2007 GDF/IFS Costa Rica 1864-2007 UK pound, German DM GDF/IFS Denmark 1905-2007 GDF/IFS Dominican Republic 1898-2000 OXF, Picks Ecuador 1980-2007 IFS 1869-2007 GFD/IFS UK pound Egypt 1870-2007 GFD/IFS El Salvador 1900-2007 GFD/IFS German DM Finland ESTDB/Course of the UK pound 1619-1810 France Exchange 1800-2007 GFD/IFS UK pound, German DM 1698-1810 ESTDB/Course of the UK pound Germany Exchange 1795-2007 GFD/IFS 1872-1939 Lazaretou UK pound, German DM Greece 1901-2007 GFD/IFS 1900-2007 GFD/IFS Guatemala 1870-2007 GFD/IFS Honduras 1900-2007 GFD/IFS Austrian schilling Hungary 1823-2007 GFD/IFS UK pound India 1876-2007 GFD/IFS Dutch guilder Indonesia 1816-2007 UK pound, German DM GFD/IFS Italy 1862-2007 GFD/IFS UK pound Japan UK pound 1898-2007 GFD/IFS Kenya 1905-2007 GFD/IFS Japanese yen Korea 1900-2007 GFD/IFS UK pound Malaysia 1900-2007 GFD/IFS UK pound Mauritius 1814-2007 GFD/IFS UK pound, French franc Mexico 1823-1999 GFD 94

97 Table AI.2 Modern Nominal Exchange Rates-concluded (Domestic currency units per US dollar and other currencies noted) Period covered Other relevant rates Country Source 1897-2007 GFD/IFS French franc/euro Morocco 1900-2007 GFD/IFS UK pound Myanmar (Burma) ESTDB/Course of the UK pound 1698-1810 Netherlands Exchange GFD/IFS German DM 1792-2007 1892-2007 GFD/IFS UK pound New Zealand 1912-2007 GFD/IFS Nicaragua 1900-2007 GFD/IFS UK pound Nigeria 1819-2007 GFD/IFS Swedish krona, German Norway DM 1900-2007 GFD/IFS Panama 1900-2000 OXD Argentine peso Paraguay 1980-2007 IFS 1883-2007 GFD/IFS UK pound Peru 1893-2007 GFD/IFS Spanish peseta Philippines 1916-2007 GFD/IFS Poland 1750-1865 Course of the Exchange Dutch grooten Portugal 1794-2007 GDF/IFS UK pound, German DM 1921-2007 GDF/IFS Romania 1815-2007 GFD/IFS French franc Russia 1814-2007 GFD 1900-2000 OXF/IFS 1834-2007 GFD/IFS UK pound Singapore 1900-2007 GFD/IFS UK pound South Africa 1814-2007 GFD/IFS German DM Spain 1900-2007 GFD/IFS UK pound Sri Lanka 1814-2007 GDF/IFS UK pound, German DM Sweden 1895-2007 GDF/IFS UK pound, Japanese yen Taiwan 1859-2007 GFD/IFS UK pound Thailand (Siam) 1900-2007 GFD/IFS French franc Tunisia 1859-2007 GFD/IFS UK pound Turkey 1619-1810 ESTDB/Course of the French franc United Kingdom Exchange 1660-2007 GFD/IFS 1660-2007 GFD/IFS United States 1900-2007 GFD/IFS Uruguay 1900-2007 GFD/IFS Venezuela 1900-2007 GFD/IFS UK pound Zambia 1900-2007 GFD/IFS UK pound Zimbabwe 95

98 Table AI.3 Early Silver-based Exchange Rates (Domestic currency units per UK pence) Period Covered Source Currency/Commentary Country RR, Table A4 kreuzer, Vienna 1371-1860 Austria 1349-1801 RR, Table A4 Hoet Belgium 1258-1789 RR, Table A4 livre tournois France RR, Table A4 composite pfenning 1350-1830 Germany 1289-1858 RR, Table A4 lira fiorentina Italy 1366-1800 RR, Table A4 Composite Netherlands 1750-1855 RR, Table A4 Reis Portugal 1761-1840 common ruble RR, Table A4 Russia 1351-1809 RR, Table A4 Composite Spain RR, Table A4 mark ortug 1523-1573 Sweden 1555-1914 RR, Table A4 Akche Turkey Table AI.4 Silver Content of Currencies Currency/Commentary Country Period Covered Sources 1371-1860 Allen & Unger kreuzer, Vienna Austria 1349-1801 Korthals Hoet Belgium 1258-1789 Allen & Unger livre tournois France Allen & Unger pfenning/Frankfurt 1350-1798 Germany 1417-1830 pfenning/Augsburg 1289-1858 Malanima lira fiorentina Italy Allen & Unger Flemish grote 1366-1575 Netherlands 1450-1800 Van Zanden Guilder 1750-1855 Godinho Reis Portugal 1761-1840 Lindert, Mironov common ruble Russia 1761-1815 Assignatzia dinar, Valencia 1351-1650 Allen & Unger Spain 1501-1800 vellon maravedis, New Castille 1630-1809 Montfort Real 1523-1573 Soderberg mark ortug Sweden 1555-1914 Ozmukur & Pamuk Akche Turkey 1261-1918 Allen & Unger Pence United Kindgom Dollar 1800-1979 Allen & Unger United States 96

99 Table AI.5 Nominal and Real Gross National Product and Output Index (Domestic currency units) Period covered Source Commentary Country 1950-2007 GFD/WEO/IFS Algeria 1962-2007 GFD/WEO/IFS Angola 1969-2007 Flandreau & Zumer Nominal 1884-1913 Argentina Index of total production 1875-2000 Diaz et. al. (1995=100) OXF Real (base=1970) 1900-2000 1900-2007 GFD/WEO 1798-2007 GFD/WEO Nominal Australia Diaz.et. al. Index of total production 1820-2000 (1995=100) Austria 1835-2007 BNB, Centre d'études Nominal Belgium économiques de la KUL Bolivia 1861-2007 GFD/WEO Nominal Brazil 1850-2000 Diaz et. al. Index of total production (1995=100) 1900-2000 OXF (base=1970) Canada Central African Republic Index of total production 1810-2000 Diaz et. al. Chile (1995=100) China NNP 1962-1999 GFD 1900-2000 OXF Real, (base=1970) Colombia 1925-1999 GFD 1947-1999 GFD Costa Rica Cote D’ Ivoire 1818-1975 Nordic Historical Denmark National Accounts Dominican Republic Ecuador 1886-1945 Yousef Egypt 1952-2007 GFD/WEO 1821-1859 Landes Cotton output El Salvador 1860-2001 Nordic Historical Finland National Accounts France Germany 1833-1939 Kostelenos et. al. Greece 1880-1913 Flandreau & Zumer GNI 1927-1999 GFD 1948-1999 GFD Guatemala Honduras 97

100 Table AI.5 Nominal and Real Gross National Product and Output Index (Domestic currency units) Period covered Country Source Commentary GFD/WEO 1900-1921, 1948-2007 India 1861-1899 Brahamanda Real, per capita Index of total production Diaz et. al. 1820-2000 1815-1913 VanZanden Java Indonesia Bassino and Van der 1910-1970 Eng 1921-1939, 1951-1999 GFD 1911-1938, 1953-1999 GFD 1911-1940 Myun Soo Cha and Nak Thousand yen,GNI also Korea calculated Kim GNI 1953-1999 GFD Bassino and Van der 1910-1970 Malaysia Eng 1949-1999 GFD DIA 1820-2000 Index of total production Mexico (1995=100) 1900-2000 OXF 1900-2000 OXF Real, (base=1970) 1925-1999 GFD 1913-1970 Bassino and Van der Myanmar (Burma) Eng 1950-1999 GFD 1800-1913 National Accounts of Netherlands the Netherlands 1830-2003 Grytten Norway 1900-2000 OXF Real (base=1970) Peru 1900-2000 OXF Nominal 1942-1999 GFD 1910-1970 Bassino and Van der Philippines Eng 1946-2997 GFD/WEO Poland Portugal 1885-1913 Flandreau & Zumer Nominal Russia GNI 1928-1940, 1945-1995 GFD 1979-1997 GFD 1992-1999 GFD Production 1911-1999 GFD South Africa Spain 1900-1970 Bassino and Van der Sri Lanka Eng Real, per capita 1720-2000 Edvinsson Sweden 1800-2000 Nominal and real 1910-1970 Bassino and Van der Taiwan Eng Thailand (Siam) 1946-2007 GFD/WEO 1910-1970 Bassino and Van der Eng 98

101 Table AI.5 Nominal and Real Gross National Product and Output Index (Domestic currency units) Period covered Commentary Country Source Tunisia 1923-2005 Nominal Turkey 1950-1999 GFD 1830-1999 GFD GNI United Kingdom 1948-1999 GFD 1790-2002 Real, per capita Historical Statistics of United States the United States 1948-1999 GFD 1935-1999 GFD Uruguay 1955-2000 OXF 1900-2000 OXF Real (base=1970) GNI 1955-1999 GFD 1830-2002 Baptista Venezuela 1900-2000 OXF Real (base=1970) 1950-2007 GFD/WEO Zambia Zimbabwe 99

102 Table AI.6 Gross National Produc t: PPP in constant dollars (also available on a per capita basis) Country Source Commentary Period covered 1950-2005 MAD/TED Algeria Interpolation 1821-1949 1820-2005 RR 1950-2005 MAD/TED Angola 1875-2000 Diaz et. al (base=1996) Argentina 1900-2005 MAD/TED RR Interpolation 1871-1899 1870-2005 1820-2006 MAD/TED Australia 1870-2006 MAD/TED Austria 1820-2006 RR Interpolation 1821-1869 1846-2006 MAD/TED Belgium 1820-2006 RR Interpolation 1821-1845 1945-2005 MAD/TED Bolivia Interpolation 1936-1944 1936-2005 RR 1820-2000 DIA (base=1996) Brazil 1870-2005 MAD/TED 1820-2005 RR Interpolation 1821-1869 1870-2006 MAD/TED Canada 1820-2006 RR Interpolation 1821-1869 1950-2003 MAD Central African Republic 1810-2000 Diaz et. Al. (base=1996) Chile 1820-2005 MAD/TED 1929-1938 MAD/TED China 1950-2006 1900-2005 MAD/TED Colombia 1920-2005 MAD/TED Costa Rica 1820-2006 MAD/TED Denmark 1950-2005 MAD/TED Dominican Republic 1942-2005 RR Interpolation 1942-1949 1939-2005 MAD/TED Ecuador 1900-2000 OXF (base=1970) 1900-2005 RR Interpolation 1900-1938 1950-2005 MAD/TED Egypt 1820-2005 RR Interpolation 1821-1949 (base=1970) 1900-2000 OXF El Salvador 1860-2006 MAD/TED Finland 1820-2006 RR Interpolation 1821-1859 1820-2006 MAD/TED France 1850-2006 MAD/TED Germany 1820-2006 RR Interpolation 1821-1849 1921-2006 MAD/TED Greece 1820-2006 RR Interpolation 1821-1920 1920-2005 MAD/TED Guatemala 1920-2005 MAD/TED Honduras 1824-2006 MAD/TED Hungary 1870-2006 RR Interpolation 1871-1923 100

103 Table AI.6 Gross National Produc t: PPP in constant dollars (also available on a per capita basis) Country Source Commentary Period covered 1884-2006 MAD/TED India 1820-2006 RR Interpolation 1821-1883 1870-2005 MAD/TED Indonesia 1820-2005 RR Interpolation 1821-1869 1870-2006 MAD/TED Japan 1820-2006 RR Interpolation 1821-1869 1950-2005 MAD/TED Kenya 1911-2006 MAD/TED Korea Interpolation 1821-1910 1820-2006 RR 1911-2005 MAD/TED Malaysia 1820-2006 RR Interpolation 1821-1910 1950-2005 MAD/TED Mauritius 1900-2006 MAD/TED Mexico 1820-2006 RR Interpolation 1821-1899 1950-2005 MAD/TED Morocco 1820-2005 RR Interpolation 1821-1949 1950-2005 MAD/TED Myanmar (Burma) Interpolation 1821-1949 1820-2005 RR 1945-2005 MAD/TED Panama Interpolation 1939-1944 1939-2005 RR 1939-2005 MAD/TED Paraguay 1895-2005 MAD/TED Peru 1902-2005 MAD/TED Philippines 1870-2005 RR Interpolation 1871-1901 1929-1938 MAD/TED Poland 1950-2006 Interpolation 1871-1928 1870-2005 RR 1865-2006 MAD/TED Portugal 1820-2006 RR Interpolation 1821-1864 1926-1938 MAD/TED Romania 1950-2006 1928-2006 MAD/TED Russia 1950-2005 MAD/TED Singapore 1820-2005 RR Interpolation 1821-1949 1950-2005 MAD/TED South Africa 1905-2005 RR Interpolation 1905-1949 1850-2006 MAD/TED Spain 1820-2005 RR Interpolation 1821-1849 101

104 Table AI.6 Gross National Produc t: PPP in constant dollars (also available on a per capita basis) Country Period covered Source Commentary 1820-2006 MAD/TED Sweden 1950-2005 MAD/TED Thailand (Siam) 1820-2005 RR Interpolation 1821-1949 1950-2005 MAD/TED Tunisia 1820-2005 RR Interpolation 1821-1949 1923-2005 MAD/TED Turkey 1830-2006 MAD/TED United Kingdom 1820-2006 RR Interpolation 1821-1829 1870-2006 MAD/TED United States Interpolation 1821-1869 1820-2006 RR 1870-2005 MAD/TED Uruguay 1900-2005 MAD/TED Venezuela 1820-2005 RR Interpolation 1821-1899 1950-2005 MAD/TED Zambia 1950-2005 MAD/TED Zimbabwe 1919-2005 MAD/TED 102

105 Table AI.7 Central Government Expenditure and Revenue unless otherwise noted) (Domestic currency units Period covered Commentary Country Sources 1834-1960 Revenues begin in 1830 MIT Algeria 1964-1975 1994-1996 1963-2003 KRV 1915-1973 MIT Angola 1980-2003 KRV 1864-1999 MIT Argentina 1880-1913 Flandreau & Zumer 1963-2003 KRV Revenues begin in 1824, 1839-1900 MIT Australia New South Wales and other provinces circa 1840 1901-1997 MIT Commonwealth 1965-2003 KRV 1791-1993 MIT World War I and II, Austria missing data 1965-2003 KRV World War I missing 1830-1993 Belgium data 1965-2003 KRV 1888-1999 MIT Revenues begin 1885 Bolivia 1963-2003 KRV 1823-1994 IBGE/MIT Brazil 1980-2003 KRV 1806-1840 MIT Lower Canada Canada 1824-1840 Upper Canada 1867-1995 Canada 1963-2003 KRV MIT 1906-1912 Central African 1925-1973 Republic 1963-2003 KRV (base=1995) Braun et. al. 1810-1995 Chile 1857-1998 MIT 1963-2003 KRV 1927-1936 Cheng Nationalist goverrment China 1963-2003 KRV 1905-1999 MIT Colombia 1963-2003 KRV 1884-1999 MIT Costa Rica 1963-2003 KRV 1895-1912 MIT Cote D’Ivoire 1926-1999 1963-2003 KRV 1853-1993 MIT Denmark 1965-2003 KRV 103

106 Expenditure and Revenue Table AI.7 Central Government unless otherwise noted) (Domestic currency units Period covered Country Sources Commentary 1905-1999 MIT Dominican Republic 1963-2003 KRV 1884-1999 MIT Ecuador 1979-2003 KRV 1821-1879 Landes Egypt 1852-1999 MIT 1963-2003 KRV 1883-1999 MIT El Salvador 1963-2003 KRV 1882-1993 MIT Finland 1965-2003 KRV 1600-1785 ESFDB France 1815-1993 MIT 1965-2003 KRV 1688-1806 ESFDB Germany (Prussia) 1872-1934 Revenues end in 1942 MIT Germany 1946-1993 West Germany 1979-2003 KRV 1885-1940 MIT Expenditure begins in Greece 1833 and again in 1946 1954-1993 1963-2003 KRV 1882-1999 MIT Guatemala 1963-2003 KRV 1879-1999 MIT Honduras 1963-2003 KRV 1868-1940 MIT Hungary 1810-2000 MIT India 1963-2003 KRV 1821-1940 Mellegers Netherlands East Indies, Indonesia florins, high government MIT 1816-1939 1959-1999 1963-2003 KRV 1862-1993 MIT Italy 1965-2003 KRV 1868-1993 MIT Japan 1963-2003 KRV 1895-2000 MIT Kenya 1970-2003 KRV 1905-1939 MIT Japanese yen Korea 1949-1997 South Korea 1963-2003 KRV 1883-1938 MIT Malaya Malaysia 1946-1999 1963-2003 KRV 1812-2000 MIT Mauritius 1963-2003 KRV 104

107 Table AI.7 Central Government Expenditure and Revenue (Domestic currency units unless otherwise noted) Period covered Country Sources Commentary 1825-1998 MIT Mexico 1963-2003 KRV Revenues also 1920- 1938-2000 MIT Morocco 1929 1963-2003 KRV 1946-1999 MIT Myanmar (Burma) 1963-2003 KRV 1845-1993 MIT Netherlands 1965-2003 KRV 1841-2000 MIT New Zealand 1965-2003 KRV 1900-1999 MIT Nicaragua 1963-2003 KRV 1874-1998 MIT Nigeria 1963-2003 KRV 1850-1992 MIT Norway 1965-2003 KRV 1909-1996 MIT Panama 1963-2003 KRV 1881-1900 MIT Revenues through 1902 Paraguay 1913-1993 1963-2003 KRV 1846-1998 MIT Peru 1963-2003 KRV 1901-2000 World War II missing MIT Philippines data 1963-2003 KRV 1922-1937 MIT Poland Expenditure only 1947-1993 MIT 1879-1902 Portugal 1917-1992 1975-2003 KRV 1883-1992 MIT Expenditure begins in Romania 1862 1769-1815 ESFDB Russia 1804-1914 MIT 1924-1934 1950-1990 1914-1921 Katzenellenbaum 1931-1951 Condoide National budget 1963-2000 MIT Singapore 105

108 Table AI.7 Central Government Expenditure and Revenue (Domestic currency units unless otherwise noted) Sources Commentary Country Period covered 1826-1904 Natal begins in 1850 MIT South Africa 1905-2000 1963-2003 KRV 1520-1553 ESFDB Not continuous Spain 1753-1788 1850-1997 MIT 1965-2003 KRV 1811-2000 MIT Sri Lanka 1963-2003 KRV 1881-1993 MIT Sweden 1980-2003 KRV 1898-1938 MIT Taiwan 1950-2000 1891-2000 MIT Revenue begins in 1851 Thailand (Siam) 1963-2003 KRV MIT 1909-1954 Tunisia 1965-1999 1963-2003 KRV 1923-2000 MIT Turkey 1963-2003 KRV 1486-1815 ESFDB United Kingdom 1791-1993 MIT 1963-2003 KRV 1789-1994 MIT United States 1960-2003 KRV 1871-1999 MIT Uruguay 1963-2003 KRV 1830-1998 MIT Venezuela 1963-2003 KRV 1963-2003 KRV 1963-2003 KRV Zambia 1894-1997 MIT Zimbabwe 1963-2003 KRV 106

109 Table AI.8 Total Exports and Imports (local currency units and US$, as noted) Country Sources Currency/ Period covered Commentary 1831-2007 GFD/WEO Algeria 1891-2007 GFD/WEO Angola 1864-2007 GFD/WEO Lcu Argentina 1885-2007 GFD/WEO US$ 1880-1913 Exports Flandreau & Zumer 1826-2007 GFD/WEO Australia 1831-2007 Austria 1846-2007 GFD/WEO Belgium 1816-2007 GFD/WEO US$ Lcu 1899-1935 GFD Bolivia US$ 1899-2007 1821-2007 GFD/WEO Brazil 1880-1913 Flandreau & Zumer Exports 1832-2007 GFD/WEO Lcu Canada US$ 1867-2007 1857-1967 GFD/WEO Lcu Chile 1865-1937 GFD/WEO Lcu China 1950-2007 1835-1938 Lcu Colombia 1919-2007 GFD/WEO US$ 1854-1938 GFD/WEO Lcu Costa Rica 1921-2007 US$ 1892-2007 GFD/WEO Lcu Cote D’Ivoire 1900-2007 US$ 1841-2007 GFD/WEO Exports begin in 1818, Denmark lcu 1865-2007 US$ 1889-1949 GFD/WEO Lcu Ecuador 1924-2007 US$ 1850-2007 GFD/WEO Lcu Egypt 1869-2007 US$ Exports begin in 1854, 1859-1988 GFD/WEO El Salvador lcu 1870-2007 US$ 1818-2007 GFD/WEO Lcu Finland 1900-2007 US$ 1800-2007 GFD/WEO France 1880-2007 GFD/WEO Germany 1850-2007 GFD/WEO Lcu Ghana 1900-2007 US$ 1849-2007 GFD/WEO Lcu Greece US$ 1900-2007 1851-2007 GFD/WEO Guatemala 107

110 Table AI.8 Total Exports and Imports (local currency units and US$, as noted) Period covered Sources Currency Country 1896-2007 GFD/WEO Honduras 1832-2007 GFD/WEO India 1823-1974 GFD/WEO Lcu Indonesia 1876-2007 US$ 1861-2007 GFD/WEO Italy 1862-2007 GFD/WEO Japan 1900-2007 GFD/WEO Kenya 1886-1936 GFD/WEO Lcu Korea US$ 1905-2007 1905-2007 GFD/WEO Includes Singapore until Malaysia 1955 1833-2007 GFD/WEO Lcu Mauritius 1900-2007 US$ 1797-1830 GFD/WEO UK pound Mexico 1872-2007 Lcu 1797-1830 US$ 1872-2007 1947-2007 GFD/WEO Morocco 1937-2007 GFD/WEO Myanmar (Burma) 1846-2007 GFD/WEO Netherlands 1895-2007 GFD/WEO Nicaragua 1851-2007 GFD/WEO Norway 1905-2007 GFD/WEO Lcu Panama 1879-1949 GFD/WEO US$ Paraguay 1923-2007 1866-1952 GFD/WEO Lcu Peru US$ 1882-2007 1884-2007 GFD/WEO Philippines 1924-2007 GFD/WEO Poland 1861-2007 GFD/WEO Portugal 1862-1993 GFD/WEO Lcu Romania 1921-2007 US$ 1802-1991 GFD/WEO Lcu Russia 1815-2007 US$ 1948-2007 GFD/WEO Singapore 1826-2007 GFD/WEO Lcu South Africa 1900-2007 US$ 108

111 Table AI.8 Total Exports and Imports (local currency units and US$, as noted) Sources Currency Country Period covered 1822-2007 GFD/WEO Spain 1825-2007 GFD/WEO Lcu Sri Lanka 1900-2007 US$ 1832-2007 GFD/WEO Sweden 1891-2007 GFD/WEO Taiwan 1859-2007 GFD/WEO Thailand (Siam) 1878-2007 GFD/WEO Turkey 1796-2007 GFD/WEO United Kingdom 1788-2007 GFD/WEO United States 1862-1930 GFD/WEO Uruguay 1899-2007 1830-2007 GFD/WEO Venezuela 1900-2007 1908-2007 GFD/WEO Zambia 1900-2007 GFD/WEO Zimbabwe Table AI.9 Global Indicators and Financial Centers Series Period covered Sources Country Current account 1816-2006 Imlah, Mitchell, and United Kingdom United Kingdom balance/GDP National Statistics Consol rate 1790-2007 GFD and Bank of England GFD and Bank of Discount rate 1790-2007 England Current account 1790-2006 Historical Statistics of United States the United States, WEO balance/GDP 60-90 day commercial 1830-1900 Historical Statistics of paper the United States Discount rate 1915-2007 GFD and Board of Governors of the Federal Reserve Federal funds rate 1950-2007 Board of Governors of the Federal Reserve Historical Statistics of Long-term bond 1798-2007 the United States, Board of Governors of the Federal Reserve Commodity prices, Gayer, Rostow, and 1790-1850 World nominal and real Schwartz 1854-1990 Boughton-IMF 1862-1999 Economist 1980-2007 WEO Sovereign external 1341-2007 Macdonald, Purcell and default dates Kaufman, Reinhart, Rogoff, and Savastano, Suter, and Standard and Poor’s 109

112 Appendix II. Public Debt This data appendix covers the government debt series used, while Appendix I is devoted to the database on macro time series. Abbreviations of frequently-used sources (additional sources listed in tables below) CLYPS: Cowan, Levy-Yeyati, Panizza, Sturzenegger ESFDB: European Stat e Finance Data Base GFD: Global Financial Data , The World Bank International Financial IFS: Statistics, IMF. LM: Lindert & Morton LofN: League of Nations MAR: Marichal MIT: Mitchell RR: Reinhart and Rogoff UN: United Nations World Economic Outlook, IMF WEO: Lcu: local currency units List of Tables Table AII.1 Public Debentures: Ex ternal Government Bond Issues us External) Public Debt Table AII.2 Total (Domestic pl Table AII.3 External Public Debt Table AII.4 Domestic Public Debt 110

113 Table AII. 1 Public Debentures: External Government Bond Issues Period covered Sources Country Commentary LM, MAR Includes first loan 1824-1968 Argentina 1927-1946 UN 1857-1978 Attard, LM Australia 1927-1946 UN 1864-1930 MAR Bolivia 1927-1946 UN Includes first loan 1843-1970 Bazant, LM, MAR, Brazil Summerhill 1928-1946 UN 1860-1919 LM Canada 1928-1946 UN 1822-1830 LM, MAR Includes first loan Chile 1928-1946 UN 1865-1938 Huang, Winkler China 1822-1929 MAR Colombia 1928-1946 UN 1871-1930 MAR Costa Rica 1862-1965 Landes, LM Includes first loan Egypt 1928-1946 UN 1922-1930 MAR El Salvador 1928-1946 UN 1824-1932 Includes first loan Levandis Greece (Independence loan) 1928-1939 UN 1856-1930 MAR Guatemala 1928-1939 UN 1867-1930 MAR Honduras India 1928-1945 UN LM Includes first loan 1870-1965 Japan 1928-1939 UN 1824-1946 Bazant, LM, MA R Includes first loan Mexico 1928-1944 UN 1923-1930 Panama 1928-1945 UN Includes first loan 1822-1930 MAR Peru 1928-1945 UN 1815-1916 Crisp, LM, Miller Russia 1928-1946 UN South Africa 1928-1947 UN Thailand (Siam) 1854-1965 Clay, LM Includes first loan Turkey 1933-1939 UN 1871-1939 MAR Uruguay 1928-1947 UN Includes first loan MAR 1822-1930 Venezuela 1928-1947 UN 111

114 Table AII.2 Total (Domestic pl us External) Public Debt (currency units are noted) Source Commentary Period covered Country 1863-1971 Garcia Vizcaino Lcu Argentina 1914-1981 LofN/UN Lcu 1980-2005 GFD, Jeanne & Guscina 1852-1914 Page Australia 1914-1981 LofN/UN Lcu Lcu 1980-2007 Australian Office of Financial Management 1880-1913 Flandreau & Zumer Lcu Austria 1945-1984 UN Lcu 1970-2006 Austrian Federal euros Financing Agency 1830-2005 BNB, Centre d'études euros Belgium économiques de la KUL 1914-1953 LofN/UN Lcu Bolivia 1968-1981 1991-2004 CLYPS US$ 1880-1913 Flandreau & Zumer Lcu Brazil 1923-1972 LofN/UN Lcu 1991-2005 GFD, Jeanne & Guscina 1867-2007 Statistics Canada, Lcu Canada Bank of Canada 1827-2000 Diaz et. al. Lcu Chile 1914-1953 LofN/UN Lcu 1990-2007 Ministerio de US$ Hacienda 1894-1950 Cheng, Huang, RR China 1981-2005 GFD, Jeanne & Guscina Lcu 1923-2006 Contraloria General Colombia de la Republica 1892-1914 Soley-Guell Lcu Costa Rica 1914-1983 LofN/UN Lcu 1980-2007 CLYPS, Ministerio de US$ Hacienda Lcu 1970-1980 UN Cote D’Ivoire 1880-1913 Flandreau & Zumer Lcu Denmark 1914-1975 LofN/UN Lcu 1990-2007 Danmark’s National Lcu Bank 1914-1952 LofN/UN Lcu Dominican Republic 1914-1972 LofN/UN Lcu Ecuador US$ 1990-2006 Ministry of Finance 112

115 External) Public Debt-continued Table AII.2 Total (Domestic plus (currency units are noted) Source Country Period covered Commentary 1914-1959 LofN/UN Lcu Egypt Ministry of Finance Lcu 2001-2005 1914-1963 LofN/UN Lcu El Salvador 1976-1983 US$ 1990-2004 CLYPS 2003-2007 Banco Central de US$ Reserva 1914-1983 LofN/UN Lcu Finland 1978-2007 State Treasury Finland Lcu Flandreau & Zumer Lcu 1880-1913 France 1913-1972 LofN/UN Lcu Ministère du Budget, Lcu 1999-2007 des comptes public 1880-1913 Lcu Flandreau & Zumer Germany 1914-1983 LofN/UN Lcu 1950-2007 Bundesbank Lcu 1869-1893 Levandis Not continuous, Lcu Greece Flandreau & Zumer Lcu 1880-1913 1920-1983 LofN/UN Lcu 1993-2006 OECD 1921-1982 LofN/UN Lcu Guatemala US$ 1980-2005 CLYPS 1914-1971 LofN/UN Lcu Honduras 1980-2005 CLYPS US$ 1913-1942 LofN/UN Lcu Hungary 1992-2005 Jeanne & Guscina 1840-1920 Statistical Abstract India Relating to British India 1913-1983 LofN/UN Lcu 1980-2005 Jeanne & Guscina 1972-1983 UN Lcu Indonesia 1998-2005 Bank Indonesia/GDF 1880-1913 Flandreau & Zumer Lcu Italy 1914-1894 LofN/UN Lcu 1982-2007 Dipartamento del Lcu Tesoro Lcu 1872-2007 Historical Statistics of Japan Japan/Bank of Japan 1911-1935 Frankel UK pounds Kenya 1961-1980 LofN/UN Lcu 1997-2007 Lcu Central Bank of Kenya 1910-1938 Mizoguchi & Umemura Yen Korea 1970-1984 LofN/UN 1990-2004 Jeanne & Guscina 1947-1957 UN Lcu Malaysia 1976-1981 1980-2004 Jeanne & Guscina 1970-1984 LofN/UN Lcu Mauritius 1998-2007 Lcu 113

116 Table AII.2. Total (Domestic plus External) Public Debt-continued (currency units are noted) Source Commentary Country Period covered Not continuous 1814-1946 Bazant Mexico 1914-1979 LofN/UN Lcu Direccion General de la 1980-2006 Deuda Publica Lcu 1965-1980 UN Morocco 1880-1914 Flandreau & Zumer Lcu Netherlands 1914-1977 LofN/UN Lcu Dutch State Treasury 1914-2008 Lcu Agency Lcu 1858-2006 Statistics New New Zealand Zealand/NZ Treasury 1914-1945 LofN/UN Lcu Nicaragua 1970-1983 US$ 1991-2005 CLYPS 1880-1914 Flandreau & Zumer Lcu Norway 1913-1983 LofN/UN Lcu 1965-2007 Ministry of Finance Lcu 1915-1983 LofN/UN US$ Panama 1980-2005 CLYPS US$ 1927-1947 LofN/UN Lcu Paraguay 1976-1982 1990-2004 CLYPS US$ 1918-1970 LofN/UN Lcu Peru 1990-2005 CLYPS US$ 1948-1982 LofN/UN Lcu Philippines 1980-2005 GFD, Jeanne & Guscina 1920-1947 LofN/UN Poland 1994-2004 GFD, Jeanne & Guscina 1851-1997 INE-Portugese Portugal Statistical Agency 1914-1975 LofN/UN Lcu Banco de Portugal In euros from 1999 1980-2007 1880-1914 French francs and Lcu Crisp, Flandreau & Russia Zumer 1922-1938 LofN/UN Lcu 1993-2005 Jeanne & Guscina 1969-1982 UN Lcu Singapore 1986-2006 Monetary Authority Lcu 1859-1914 Page UK pounds South Africa 1910-1982 LofN/UN Lcu 1946-2006 South Africa Reserve Lcu Bank 114

117 Appendix Table AII.2 Total (Domestic pl us External) Pub lic Debt-concluded (currency units are noted) Period covered Source Country Commentary 1504-1679 ESFDB Not continuous Spain 1850-2001 Estadisticas Historicas Lcu de España: Siglos XIX- XX 1999-2006 Banco de España Euro 1861-1914 Page UK pounds Sri Lanka Lcu 1950-1983 UN 1990-2006 Central Bank of Sri Lcu Lanka 1880-1913 Flandreau & Zumer Sweden 1914-1984 LofN/UN Lcu 1950-2006 Riksgälden Lcu 1913-1984 LofN/UN Lcu Thailand (Siam) 1980-2006 Jeanne & Guscina, Bank of Thailand 1972-1982 LofN/UN Lcu Tunisia 2004-2007 Central Bank of Tunisia Lcu 1933-1984 LofN/UN Lcu Turkey 1986-2007 Turkish Treasury US$ Total funded debt 1693-1786 Quinn United Kingdom 1781-1915 Bazant, Pa ge 1787-1815, not contiuous 1850-2007 UK Debt Management Office 1791-2007 Treasury Direct United States 1914-1947 LofN/UN Lcu Uruguay 1972-1984 1999-2007 Banco Central del US$ Uruguay 1914-1982 LofN/UN Venezuela 1983-2005 Jeanne & Guscina 1924-1936 Frankel UK pounds Zimbabwe 1969-1982 UN 115

118 Table AII.3 External Public Debt (currency units are noted) Country Source Commentary Period covered US$ 1970-2005 GFD Algeria 1989-2005 GFD US$ Angola 1863-1971 Garcia Vizcaino Lcu Argentina 1914-1981 LofN/UN Lcu 1970-2005 GFD US$ 1852-1914 Page Australia 1914-1981 LofN/UN Lcu 1980-2007 Australian Office of Lcu Financial Management 1945-1984 UN Lcu Austria 1970-2006 Austrian Federal euros Financing Agency 1914-1981 LofN/UN Lcu Belgium 1992-2007 1914-1953 LofN/UN Lcu Bolivia 1968-1981 1970-2005 GFD 1991-2004 CLYPS US$ 1824-2000 IBGE £s and US$ Brazil 1923-1972 LofN/UN Lcu 1970-2005 GFD US$ 1991-2005 Jeanne & Guscina US$ Lcu 1867-2007 Statistics Canada, Bank Canada of Canada 1970-2005 GFD US$ Central African Republic 1822-2000 Diaz et. al. Lcu Chile 1970-2005 GFD US$ 1822-1930 RR Estimated from debentures 1865-1925 RR Estimated from China debentures 1981-2005 GFD US$ 1923-2006 Lcu Contraloria General de Colombia la Republica 1892-1914 Soley-Guell Lcu Costa Rica 1914-1983 LofN/UN Lcu US$ 1980-2007 CLYPS, Ministerio de Hacienda 1970-2005 GFD US$ Cote D’Ivoire 1914-1952 LofN/UN Lcu Dominican Republic 1961-2004 Banco de la Republica US$ 1914-1972 LofN/UN Lcu Ecuador 1970-2005 GFD US$ Ministry of Finance US$ 1990-2007 ` Estimated from 1862-1930 RR Egypt debebtures 1914-1959 LofN/UN Lcu 1970-2005 GFD US$ 116

119 Table AII.3 External Public Debt-continued (currency units are noted) Period covered Source Country Commentary 1913-1972 LofN/UN Lcu France Ministère du Budget, Lcu 1999-2007 des comptes public 1914-1983 LofN/UN Lcu Germany 1920-1983 LofN/UN Lcu Greece 1921-1982 LofN/UN Lcu Guatemala US$ 1970-2005 GFD 1980-2005 CLYPS US$ 1914-1971 LofN/UN Lcu Honduras 1970-2005 GDF US$ 1980-2005 US$ 1913-1942 LofN/UN Lcu Hungary 1982-2005 GDF US$ 1992-2005 Jeanne & Guscina 1840-1920 Statistical Abstract India relating to British India 1913-1983 LofN/UN Lcu 1980-2005 Jeanne & Guscina 1972-1983 UN Lcu Indonesia 1970-2005 GDF US$ 1880-1913 Lcu Flandreau & Zumer Italy 1914-1984 LofN/UN Lcu 1982-2007 Dipartamento del Lcu Tesoro 1872-2007 Historical Statistics of Lcu Japan Japan/Bank of Japan 1910-1938 Mizoguchi & Umemura Yen 1961-1980 LofN/UN Lcu Kenya 1970-2005 GDF US$ Central Bank of Kenya Lcu 1997-2007 1970-1984 LofN/UN Lcu Korea 1970-2005 GDF US$ 1990-2004 Jeanne & Guscina US$ 1947-1957 LofN/UN Lcu Malaysia 1976-1981 1970-2005 GDF US$ 1980-2004 Jeanne & Guscina 1970-1984 LofN/UN Lcu Mauritius US$ 1970-2005 GDF Lcu 1998-2007 Bank of Mauritius 117

120 Table AII. External Public Debt-continued (currency units are noted) Country Source Commentary Period covered 1814-1946 Bazant Not continuous Mexico 1820-1930 RR Estimated from debentures 1914-1979 LofN/UN Lcu 1970-2005 GDF US$ Direccion General de la 1980-2006 Deuda Publica 1965-1980 UN Lcu Morocco 1970-2005 GDF US$ 1880-1914 Flandreau & Zumer Lcu Netherlands 1914-1977 LofN/UN Lcu 1914-2008 Lcu Dutch State Treasury Agency 1858-2006 Statistics New Lcu New Zealand Zealand/NZ Treasury 1914-1945 LofN/UN Lcu Nicaragua 1970-1983 US$ 1970-2005 GDF 1991-2005 CLYPS US$ 1880-1914 Flandreau & Zumer Lcu Norway 1913-1983 LofN/UN Lcu 1965-2007 Lcu Ministry of Finance 1915-1983 LofN/UN US$ Panama 1980-2005 CLYPS US$ 1927-1947 LofN/UN Lcu Paraguay 1976-1982 1970-2005 GFD US$ 1990-2004 CLYPS US$ 1822-1930 RR Estimated from Peru debentures 1918-1970 LofN/UN Lcu 1990-2005 CLYPS US$ 1970-2005 GFD US$ 1948-1982 LofN/UN Lcu Philippines US$ 1970-2005 GFD 1920-1947 LofN/UN Lcu Poland US$ 1986-2005 GFD 1851-1997 INE-Portugese Portugal Statistical Agency 1914-1975 LofN/UN Lcu 1980-2007 Banco de Portugal In euros from 1999 1815-1917 RR Russia 1922-1938 LofN/UN Lcu 1993-2005 Jeanne & Guscina 1969-1982 UN Lcu Singapore 118

121 Table AII.3 External Public Debt-concluded (currency units are noted) Period covered Source Commentary Country 1859-1914 Page UK pounds South Africa 1910-1983 LofN/UN Lcu 1946-2006 South Africa Reserve Lcu Bank Lcu 1850-2001 Estadisticas Historicas Spain de España: Siglos XIX- XX 1999-2006 Banco de España Euro 1950-1983 UN Lcu Sri Lanka US$ 1970-2005 GFD 1990-2006 Lcu Central Bank of Sri Lanka 1914-1984 LofN/UN Lcu Sweden 1950-2006 Riksgälden Lcu 1913-1984 LofN/UN Lcu Thailand (Siam) 1970-2005 GFD US$ 1980-2006 Jeanne & Guscina, Bank Lcu of Thailand US$ 1970-2005 GFD Tunisia Lcu 2004-2007 Central Bank of Tunisia 1972-1982 LofN/UN Lcu Estimated from 1854-1933 RR Turkey debentures 1933-1984 LofN/UN Lcu 1970-2005 GFD US$ 1986-2007 Turkish Treasury US$ 1914-2007 LofN/UN Lcu United Kingdom 1871-1930 RR Estimated from Uruguay debentures 1914-1947 LofN/UN Lcu 1972-1984 1970-2005 GFD US$ US$ 1980-2004 CLYPS 1822-1842 RR Estimated from Venezuela debentures, US $ 1914-1982 LofN/UN Lcu 1970-2005 GFD Zambia Lcu 1969-1982 UN Zimbabwe 1970-2005 GFD US$ 119

122 Table AII.4 Domestic Public Debt (Local currency units unless otherwise noted) Period covered Commentary Country Source 1863-1971 Garcia Vizcaino Lcu Argentina 1914-1981 LofN/UN Lcu 1980-2005 GFD, Jeanne & Guscina 1914-1981 LofN/UN Lcu Australia Lcu 1980-2007 Australian Office of Financial Management 1945-1984 UN Lcu Austria 1970-2006 Austrian Federal euros Financing Agency 1914-1983 LofN/UN Lcu Belgium 1992-2007 BNB, Centre d'études économiques de la KUL 1914-1953 LofN/UN Lcu Bolivia 1968-1981 1991-2004 CLYPS US$ 1923-1972 LofN/UN Lcu Brazil GFD, Jeanne & Guscina 1991-2005 1867-2007 Statistics Canada, Bank Lcu Canada of Canada Diaz et. al. Lcu 1827-2000 Chile 1914-1953 LofN/UN Lcu 1914-1946 UN 1990-2007 Ministerio de Hacienda US$ 1894-1949 RR (from Cheng, Lcu China Huang, UN) 1923-2006 Contraloria General de Lcu Colombia la Republica 1892-1914 Soley-Guell Lcu Costa Rica 1914-1983 LofN/UN Lcu 1980-2007 CLYPS, Ministerio de US$ Hacienda Lcu 1970-1980 UN Cote D’Ivoire 1914-1975 LofN/UN Lcu Denmark 1990-2007 Danmark’s National Lcu Bank 1914-1952 LofN/UN Lcu Dominican Republic 1914-1972 LofN/UN Lcu Ecuador US$ 1990-2006 Ministry of Finance 1914-1959 LofN/UN Lcu Egypt Lcu 2001-2005 Ministry of Finance 120

123 Table AII.4 Domestic Public Debt-continued (Local currency units unless otherwise noted) Period covered Country Source Commentary 1913-1972 LofN/UN Lcu France 1999-2007 Ministère du Budget, Lcu des comptes public 1920-1983 LofN/UN Lcu Greece 1912-1941 UN 1921-1982 LofN/UN Lcu Guatemala 1980-2005 CLYPS US$ 1914-1971 LofN/UN Lcu Honduras 1980-2005 US$ 1913-1942 LofN/UN Lcu Hungary Jeanne & Guscina 1992-2005 1840-1920 Statistical Abstract India relating to British India 1913-1983 LofN/UN Lcu Jeanne & Guscina 1980-2005 1972-1983 UN Lcu Indonesia 1998-2005 Bank Indonesia/GDF 1880-1913 Flandreau & Zumer Lcu Italy 1914-1894 LofN/UN Lcu 1882-2007 Dipartamento del Lcu Tesoro Historical Statistics of 1872-2007 Lcu Japan Japan/Bank of Japan 1914-1946 UN 1961-1980 LofN/UN Lcu Kenya 1997-2007 Central Bank of Kenya Lcu 1970-1984 LofN/UN Lcu Korea 1990-2004 Jeanne & Guscina Lcu 1947-1957 LofN/UN Lcu Malaysia 1976-1981 Jeanne & Guscina 1980-2004 1970-1984 LofN/UN Lcu Mauritius Lcu 1998-2007 Bank of Mauritius Not continuous 1814-1946 Bazant Mexico 1914-1979 LofN/UN Lcu 1980-2006 Direccion General de la Deuda Publica 1965-1980 UN Lcu Morocco Lcu 1880-1914 Flandreau & Zumer Netherlands 1914-1977 LofN/UN Lcu 1914-2008 Dutch State Treasury Lcu Agency 121

124 Table AII.4 Domestic Public Debt-continued (Local currency units unless otherwise noted) Period covered Source Commentary Country 1858-2006 Statistics New Lcu New Zealand Zealand/NZ Treasury 1914-1945 LofN/UN Lcu Nicaragua 1970-1983 US$ 1991-2005 CLYPS 1880-1914 Flandreau & Zumer Lcu Norway 1913-1983 LofN/UN Lcu 1965-2007 Ministry of Finance Lcu 1915-1983 LofN/UN US$ Panama 1980-2005 CLYPS US$ 1927-1947 LofN/UN Lcu Paraguay 1976-1982 1990-2004 CLYPS US$ 1918-1970 LofN/UN Lcu Peru 1990-2005 CLYPS US$ 1948-1982 LofN/UN Lcu Philippines 1980-2005 GFD, Jeanne & Guscina 1920-1947 LofN/UN Lcu Poland 1994-2004 Jeanne & Guscina Lcu Lcu 1851-1997 INE-Portugese Portugal Statistical Agency 1914-1975 LofN/UN Lcu 1980-2007 Banco de Portugal In euros from 1999 1922-1938 LofN/UN Lcu Russia 1993-2005 Jeanne & Guscina Lcu 1969-1982 UN Singapore 1986-2006 Monetary Authority Lcu 1859-1914 Page UK pounds South Africa 1910-1983 LofN/UN Lcu 1946-2006 South Africa Reserve Lcu Bank Lcu 1850-2001 Estadisticas Historicas Spain de España: Siglos XIX- XX 1999-2006 Banco de España Euro 1950-1983 UN Lcu Sri Lanka Central Bank of Sri Lcu 1990-2006 Lanka 122

125 Table AII.4 Domestic Public Debt-concluded (Local currency units unless otherwise noted) Period covered Source Commentary Country 1914-1984 LofN/UN Lcu Sweden 1950-2006 Riksgälden Lcu 1913-1984 LofN/UN Lcu Thailand (Siam) Jeanne & Guscina, Bank Lcu 1980-2006 of Thailand 1972-1982 UN Lcu Tunisia Central Bank of Tunisia 2004-2007 Lcu 1933-1984 LofN/UN Lcu Turkey 1986-2007 Turkish Treasury US$ 1914-2007 LofN/UN Lcu United Kingdom 1791-2007 Treasury Direct Lcu United States LofN/UN Lcu 1914-1947 Uruguay 1972-1984 1980-2004 CLYPS US$ 1914-1982 LofN/UN Lcu Venezuela 1983-2005 Jeanne & Guscina Lcu 1969-1982 UN Lcu Zimbabwe 123

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