Background and Context
Research Context
Bubbles appear to be happening more frequently, with recent examples including Bitcoin, Chinese stocks, housing market, and dot-com bubbles driving increased research interest.
Methodology
The authors conducted a systematic literature review of journal articles, working papers, and books examining historical financial bubbles over multiple centuries.
Study Scope
Analysis covered major historical bubbles from 1636 to 2015, examining their causes, characteristics, and economic consequences.
Historical Bubbles Timeline: Increasing Frequency in Recent Decades
- Shows dramatic increase in bubble frequency in recent decades
- Only one major bubble occurred between 1931-1980
- Seven bubbles emerged between 1981-2015
Bubble Triggers: Political vs Technological Sparks
- Political sparks included government policy changes and debt reduction schemes
- Technological sparks included railways, automobiles, and internet innovations
- Nearly even split between political and technological triggers
Banking Crisis Correlation: Post-Bubble Outcomes
- Just under half of historical bubbles led to banking crises
- Banking crises typically resulted from collapse in collateral values
- Bubbles without banking crises had less severe economic impacts
Contribution and Implications
- Introduces new "bubble triangle" framework replacing traditional rational/irrational dichotomy
- Demonstrates that bubbles with political sparks and bank leverage are most destructive
- Shows some bubbles can have positive legacy effects through technological innovation
Data Sources
- Timeline Chart: Constructed from Table 1 historical episodes data
- Spark Types: Derived from Figure 1 classification scheme
- Banking Crisis Chart: Based on "Post-bubble financial crisis" column in Table 1
Infographics by Topic
