Felix Ward
Associate Professor, Erasmus School of Economics
Tinbergen Institute Research Fellow
Research interests: macroeconomics, economic history
RESEARCH
Publications
With Adam Brzezinski, Yao Chen, and Nuno Palma, forthcoming at the Review of Economics & Statistics
Maritime disasters in the Spanish Empire (1531-1810) resulted in the loss of substantial amounts of silver money. We exploit this recurring natural experiment to estimate the effect that an exogenous change in the money supply has on the real economy. We find that negative money supply shocks caused Spanish real output to decline. A transmission channel analysis highlights slow price adjustments and credit frictions as channels through which money supply changes affected the real economy. Especially large output declines occurred in textile manufacturing against the backdrop of a credit crunch that impaired merchants’ ability to supply their manufacturers with inputs.
Leaning against the wind and crisis risk
With Moritz Schularick and Lucas ter Steege, American Economic Review: Insights, 2021
Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial crisis risk. Based on the near-universe of advanced economy financial cycles since the 19th century, we show that discretionary leaning against the wind policies during credit and asset price booms are more likely to trigger crises than prevent them.
Reconstruction of the Spanish money supply, 1492-1810
With Yao Chen, and Nuno Palma, Explorations in Economic History, 2021
How did the Spanish money supply evolve in the aftermath of the discovery of large amounts of precious metals in Spanish America? We synthesize the available data on the mining of precious metals and their international flow to estimate the money supply for Spain from 1492 to 1810. Our estimate suggests that the Spanish money supply increased more than ten-fold. Viewed through the equation of exchange this money supply increase can account for most of the price level rise in early modern Spain.
Money and prices in England and Spain, 1470-1844
With Yao Chen, Nicholas Mayhew, Nuno Palma, and Ryland Thomas, In: Bullion trade in the medieval and early modern period. ed.: Roman Zaroal. Palgrave Studies in the History of Finance series. London: Palgrave Macmillan 2024
With Yao Chen, Journal of International Economics, 2019
Current account reversals under the Gold Standard (1880-1913) – a fixed exchange rate regime – were accompanied by few, if any, output losses. To understand why, we build and estimate an open economy model of the Gold Standard, which allows us to quantitatively assess the importance of three channels of external adjustment: flexible prices, international migration, and monetary policy. Our first finding is that flexible prices were the most influential channel through which output was stabilized, whereas migration and monetary policy mattered little. Our second finding is that price flexibility was predicated on large primary sectors. Their flexibly priced products dominated the export booms that stabilized output during major external adjustments.
With Òscar Jordà, Moritz Schularick, and Alan M. Taylor, IMF Economic Review, 2019
This paper studies the synchronization of financial cycles across 17 advanced economies over the past 150 years. The comovement in credit, house prices, and equity prices has reached historical highs in the past three decades. The sharp increase in the comovement of global equity markets is particularly notable. We demonstrate that fluctuations in risk premiums, and not risk-free rates and dividends, account for a large part of the observed equity price synchronization after 1990. We also show that U.S. monetary policy has come to play an important role as a source of fluctuations in risk appetite across global equity markets. These fluctuations are transmitted across both fixed and floating exchange rate regimes, but the effects are more muted in floating rate regimes.
(CEPR Discussion Paper) (NBER Working Paper) (VOX Column)(Bank Underground)
Media coverage: The Economist
Journal of Applied Econometrics, 2017
This paper introduces classification tree ensembles (CTEs) to the banking crisis forecasting literature. I show that CTEs substantially improve out-of-sample forecasting performance over best-practice early-warning systems. CTEs enable policymakers to correctly forecast 80% of crises with a 20% probability of incorrectly forecasting a crisis. These findings are based on a long-run sample (1870–2011), and two broad post-1970 samples which together cover almost all known systemic banking crises. I show that the marked improvement in forecasting performance results from the combination of many classification trees into an ensemble, and the use of many predictors.
Can fixed exchange rate regimes cause output divergence among member states? We show that such divergence is a long-run equilibrium characteristic of a two-region model with fixed exchange rates, heterogeneous labor markets, and endogenous growth. Under flexible exchange rates, monetary policy closes output gaps and realizes the associated maximum TFP growth in both regions. Upon fixing exchange rates, the region with higher structural wage inflation falls into a low-growth trap. When calibrated to the euro area, the model implies a slowdown in the TFP growth rate of the euro area’s periphery relative to its core. An empirical analysis confirms that the periphery’s higher structural wage inflation rate contributed to its lower TFP growth in the aftermath of joining the euro.
We estimate the contribution of the American precious metal windfall to West Europe’s growth performance in the early modern period. The exogenous nature of American money arrivals allows for identification of monetary effects. We find that more than half of West Europe’s growth can be attributed to American precious metals, whose arrival promoted trade intensification and capital formation. Our findings place West Europe’s second-stage receivers in a particularly fortunate goldilocks zone that enjoyed monetary injections, while being insulated against the transport-loss induced financial crises that caused persistent damage to first-stage receiver Spain.
Global risk taking, exchange rates, and monetary policy
With Yao Chen
Email: ward@ese.eur.nl
Office hour: email me for an appointment
Visiting address:
E-Building
Burgemeester Oudlaan 50
3062 PA Rotterdam
Postal address:
Erasmus School of Economics
P.O. Box 1738
3000 DR Rotterdam