SECP Discussion Papers

Research papers of the ZNWU Fellows are usually first published as ZNWU Discussion Paper. The Discussion Papers thus contribute to a broad dissemination of our sustainability research. The aim is to receive feedback from the research community that is as diverse as possible and to bring our research to publication maturity.

“Cologne Foreign Exchange.”: Public revisions of expectations as a result of the Herstatt crisis

In 1974, a series of banking crises unsettled many of the world’s largest economies. The most prominent of them, the Herstatt crisis in Germany, sent major shock waves through the nascent global financial system. In retrospective, the crisis marks the beginning of a long trend of discontinuously rising financial instability that culminated in the crisis of 2007/08. In retrospect, the crisis appears to be a prelude or preface, if not the first chapter of a looming era of financialization and banking turbulence. As such, it could have shaped the response of those analyzing and responding to financial fragility. But how did contemporary observers in fact interpret and contextualize the episode? What mark did it leave on professional views and policies on the financial sector? With a focus on Germany, we review an extensive set of contemporary documents to analyze the impact of the 1974 crisis on experts’ expectations towards banks and finance.

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