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Using a simple sign test, we report new empirical evidence, taken from both the US and the German stock markets, showing that trading behavior substantially changed around Black Monday in 1987. It turned out that before Black Monday investors behaved more as in the momentum strategy; and after Black Monday more as in the contrarian strategy. We argue that crashes, in general, themselves are merely a manifestation of uncertainty on stock markets and the high uncertainty due to globalization is mainly responsible for this change.

We draw on two decades of historical data to analyze how regional labor markets in West Germany adjusted to one of the largest forced population movements in history, the mass inflow of eight million German expellees after World War II. The expellee inflow was distributed very asymmetrically across two West German regions. A dynamic two-region search and matching model of unemployment, which is exposed to the asymmetric expellee inflow, closely fits historical data on the regional unemployment differential and the regional migration rate. Both variables increase dramatically after the inflow and decline only gradually over the next decade. We show that despite the large and long-lasting dynamics following the expellee inflow, native workers experience only a modest loss in expected discounted lifetime labor income of 1.38%. Per-period losses in native labor income, however, are up to four times as large. The magnitude of income losses also depends on the initial location and labor market status of native workers. In counterfactual analyses, we furthermore show that economic policy interventions that affect the nature of the immigration inflow can effectively reduce native income losses and dampen adjustment dynamics in regional labor markets. One such intervention is to distribute the inflow more evenly over time. Smaller immigration inflows, similar in magnitude to the refugee inflow that Germany is experiencing today, also reduce native income losses markedly but decrease the duration of labor market adjustment only modestly.

We show that credit supply shocks have a strong impact on firm-level as well as aggregate investment by applying the methodology developed by Amiti and Weinstein (2013) to a rich dataset of matched bank-firm loans in the Portuguese economy for the period 2005 to 2013. We argue that their decomposition framework can also be used in the presence of small firms with only one banking relationship as long as they account for only a small share of the total loan volume of their banks. The growth rate of individual loans in our dataset is decomposed into bank, firm, industry and common shocks. Adverse bank shocks are found to impair firm-level investment in all firms in our sample, but in particular for small firms and those with no access to alternative financing sources. For the economy as a whole, granular shocks in the banking system account for around 20–40% of aggregate investment dynamics.