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With a Bang, not a Whimper: Pricking Germany's “Stock Market Bubble” in 1927 and the Slide into Depression

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  • Voth, Hans-Joachim

Abstract

In May 1927, the German central bank intervened indirectly to reduce lending to equity investors. The crash that followed ended the only stock market boom during Germany's relative stabilization 1924–1928. The evidence strongly suggests that the German central bank under Hjalmar Schacht was wrong to be concerned about stock prices—there was no bubble. Also, the Reichsbank was mistaken in its belief that a fall in the market would reduce the importance of short-term foreign borrowing and improve conditions in the money market. The misguided intervention had important real effects. Investment suffered, helping to tip Germany into depression.

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  • Voth, Hans-Joachim, 2003. "With a Bang, not a Whimper: Pricking Germany's “Stock Market Bubble” in 1927 and the Slide into Depression," The Journal of Economic History, Cambridge University Press, vol. 63(1), pages 65-99, March.
    • Handle: RePEc:cup:jechis:v:63:y:2003:i:01:p:65-99_00
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    3. Campbell, Gareth & Turner, John, 2010. "‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania," MPRA Paper 21820, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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