Summary of Global Cycles

Capital Flows, Commodities, and Sovereign Defaults, 1815-2015

CESifo Group Munich ,

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Global Cycles summary
In regard to capital flows and sovereign defaults, history may not repeat itself, but it does rhyme.

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8 Innovation

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Recommendation

History shows jumps in sovereign defaults – especially in emerging markets – following downturns in global capital flows, and fiscal crises are particularly acute after periods of both capital and commodity market declines. But as of the beginning of 2016, fallout from the 2012 cyclical drop in commodity prices and capital flows has been muted. Is the worst in sovereign defaults yet to come? Economists Carmen M. Reinhart, Vincent Reinhart and Christoph Trebesch review the past two centuries’ timelines of capital inflows and outflows to provide some perspective. getAbstract believes that economists, investors and executives will find their analysis a worthwhile recap of economic history for a glimpse into a possible future.

In this summary, you will learn

  • How global capital flows and commodity prices have historically affected economies
  • What two centuries of statistics reveal about sovereign defaults
  • Why emerging markets are particularly vulnerable to shifting flows
 

Summary

Data from the past two centuries show that global capital flows and fluctuating commodity prices, along with interest rate volatility, interconnect with economic cycles and sovereign defaults, particularly in emerging markets. This association is especially significant in today’s environment of declining...
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About the Authors

Carmen M. Reinhart is a professor at Harvard University. Vincent Reinhart is a visiting scholar at the American Enterprise Institute. Christoph Trebesch is an assistant professor at the University of Munich.


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