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Liquidity and Contagion: The Crisis of 1763
Open accessAbstract
The financial crisis that swept across northern Europe in 1763 bears a strong resemblance to more recent episodes of financial distress. The combination of the specific contractual arrangements at the time, interlocking credit relationships, and the high leverage of market participants triggered distress sales of assets, leading into a severe liquidity crisis. Hence, the crisis is an early instance of contagion on the asset side of the balance sheet. We highlight the salient features of the 1763 crisis and propose a stylized model of the events. Whilst the financial institutions have changed fundamentally in the intervening two hundred or so years, the underlying problems appear to be universal.
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Citations
Cited by
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Gai, P., & Kapadia, S. (2010) · Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences · doi:10.1098/rspa.2009.0410 · Cited by 1,163
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Wagner, W. (2010) · Journal of Financial Intermediation · doi:10.1016/j.jfi.2009.07.002 · Cited by 587
Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis
Hellwig, M. F. (2009) · De Economist · doi:10.1007/s10645-009-9110-0 · Cited by 389
Allen, F., & Babus, A. (2008) · SSRN Electronic Journal · doi:10.2139/ssrn.1094883 · Cited by 365
Artificial intelligence and financial crises
Danielsson, J., & Uthemann, A. (2025) · Journal of Financial Stability · doi:10.1016/j.jfs.2025.101453 · Cited by 29
Metadata
- Authors
- Schnabel, I., & Shin, H. S.
- Venue
- Journal of the European Economic Association
- Publisher
- Oxford University Press (OUP)
- Published
- 2004-12-01
- Volume
- 2
- Issue
- 6
- Pages
- 929-968
- ISSN
- 1542-4766 (ISSN-L)
- 1542-4774
- OpenAlex
- W2048309102
- Cited by
- 158
- References
- 0
- FWCI
- 11.61
- Type
- journal article
- Language
- en
- Open access
- green
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