The recent development of modern markets for emerging government debt followed a long period of capital controls extending from the 1930s to the 1980s. This youth and lack of background makes it hard to identify the contribution made by market design to the international financial architecture. A plausible alternative is provided by history. In this research, we adopt a comparative perspective, combining a study of the operation of modern primary sovereign bond markets with a study of their counterpart in the 19th century and interwar period. A direct comparison of the two main eras of financial globalization may shed a new light on the reasons why the primary bond markets work nowadays the way they do and as a result provide some insights on possible developments.
This vast research program covers a wide variety of angles. We have addressed a large number of topics that are directly policy relevant. Each time, the question has been asked with the help of a policy relevant parallel or predecessor event.
How is sovereign debt priced?
What is the impact of international guarantees on pricing of developing country debt? Do they foster development?
Can bond markets be relied upon to provide early warning signals?
What would be the impact of a country breaking up from the euro?
Can Goldman Sachs be held responsible for problems with the Greek debt?
BACKGROUND RESEARCH
Secondary Markets and Reputation:
Marc Flandreau and Frédéric Zumer, 2004, The Making of Global Finance 1880-1913, Paris: OCDE, Development Centre Studies. Proofs.
Bond Markets and Sovereign Debts in Europe: Pricing, Crises, Secession:
Marc Flandreau, 2006, "The Logic of Compromise: Monetary Bargaining in Austria-Hungary 1867-1913", European Review of Economic History, 10. CEPR DP 5397.
Marc Flandreau, 2003, "The Bank, the States, and the Market: an Austro-Hungarian Tale for Euroland, 1867-1914", in Forrest Capie and Geoffrey Wood (eds), Monetary Unions: Theory, History, Public Choice, London: Routledge. Österreichische Nationalbank Working Paper.
Marc Flandreau, Jacques Le Cacheux, and Frédéric Zumer, 1998, "Stability without a Pact? Lessons from the European Gold Standard 1880-1913", Economic Policy, 13, 26. CEPR DP 1872.
Colonial Debts and Development:
Olivier Accominotti, Marc Flandreau, and Riad Rezzik, 2010, “The Spread of Empire: Clio and the Measurement of Colonial Borrowing Costs”, forthcoming, Surveys and Speculations, Economic History Review, 2010. Accepted Draft.
Olivier Accominotti, Marc Flandreau, Riad Rezzik, and Frédéric Zumer, 2010, “Black Man’s Burden, White Man’s Welfare: Control, Devolution and Development in the British Empire 1880-1914”, European Review of Economic History, 14. CEPR DP 6811.
Marc Flandreau, 2006, "Home Biases, 19th Century Style", Journal of the European Economic Association, 4, 2-3. CEPR DP 5398.
Primary Markets in the Super Long Run: Reputation and Gatekeeping:
Marc Flandreau and Juan H. Flores, 2010, “The Industrial Organization of International Organization: Evidence from the 19th Century”. Working Paper.
Marc Flandreau, Norbert Gaillard, and Ugo Panizza, 2010, “Conflicts of Interest, Reputation, and the Interwar Debt Crisis: Banksters or Bad Luck?”. CEPR DP 7705.
Marc Flandreau, Juan H. Flores, Norbert Gaillard, and Sebastian Nieto-Parra, 2010, “The End of Gatekeeping: Underwriters and the Quality of Sovereign Debt Markets 1815-2007”, forthcoming in NBER International Seminar on Macroeconomics, 2010, 6. NBER WP 15128, CEPR DP 7347, Proofs, Vox.EU Column.
Marc Flandreau and Juan H. Flores, 2009, “Bonds and Brands: Foundations of Sovereign Debt Markets 1820–1830”, Journal of Economic History, 69, 3. CEPR DP 6420.
Marc Flandreau and Nathan Sussman, 2005, "Old Sins. Exchange Clauses and European Foreign Lending in the 19th Century", in B. Eichengreen and R. Hausmann (eds), Other People's Money. Debt Denomination and Financial Instability in Emerging Markets Economies, Chicago and London: University of Chicago Press, pp. 154-189. CEPR DP 4248.
FUNDING
This research has benefited from funding by the Fondation Banque de France and the Institut Caisse des Dépôts.
