Local Banking Panics of the 1920s: Identification and Determinants

Davison, Lee; Ramı́rez, Carlos

doi:10.2139/ssrn.2482343

Cited by 9 publications

(16 citation statements)

References 24 publications

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“…We also calculate the net interbank amplifier, which accounts for both the reduction in lending due to interbank outflows during panics and the rebound in lending when interbank funds returned after each panic subsided. The net amplifier, A net, is: Davison and Ramirez (2014). Table 5 shows that our estimates of interbank amplification amounted to a substantial fraction of the decline in all commercial bank lending.…”

Section: Aggregate Interbank Amplifiermentioning

confidence: 88%

“…al., 2013;Leavan and Valencia, 2013;Reinhart and Rogoff, 2009;Rochet, 2008 (Friedman and Schwartz, 1963;Jalil, 2015;Wicker, 1996 The second method uses micro data from examiners' reports of bank suspensions to identify patterns consistent with the symptoms of banking panics. This approach has been successfully employed (and cross-checked with the narrative method) to identify periods of bank distress during the 1930s (Richardson, 2008), to analyze banking panics on the eve of the Great Depression (Carlson, Mitchener, and Richardson, 2010), and to identify "local" panics during the 1920s (Davison and Ramirez, 2014).…”

Section: Banking Panics and Abrupt Changes In Depositor Behaviormentioning

confidence: 99%

“…(2) a new crisis beginning before its predecessor concluded, such as in the surge in suspensions that coincided with the financial crisis in Germany; or (3) the widespread suspension of payments imposed by state and/or county governments, such as the crisis in the winter of 1933, which are not recorded in our data set. Davison and Ramirez (2014), who identified local banking panics during the 1920s. The Davison-Ramirez procedure involves identifying clusters of bank suspensions by calculating the number of banks that suspend within a limited distance (measured in miles) and a rolling window (measured in days since the last suspension of a bank within the potential cluster).…”

Section: Banking Panics and Abrupt Changes In Depositor Behaviormentioning

confidence: 99%

“…Column 4 defines the panic group as banks in 10-day, 30-mile joins. Column 5 defines the panic group as banks using the Davison and Ramirez (2014) clustering algorithm. The non-panic group in these two specifications consists of suspensions not clustered in time and space.…”

Section: A Event Studies On Regional and National Panicsmentioning

confidence: 99%

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Network Contagion and Interbank Amplification during the Great Depression

Mitchener

Richardson

2019

Journal of Political Economy

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Interbank networks amplified the contraction in lending during the Great Depression. Banking panics induced banks in the hinterland to withdraw interbank deposits from Federal Reserve member banks located in reserve and central reserve cities. These correspondent banks responded by curtailing lending to businesses. Between the peak in the summer of 1929 and the banking holiday in the winter of 1933, interbank amplification reduced aggregate lending in the U.S. economy by an estimated 15 percent.

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Section: Aggregate Interbank Amplifiermentioning

confidence: 88%

Section: Banking Panics and Abrupt Changes In Depositor Behaviormentioning

confidence: 99%

Section: Banking Panics and Abrupt Changes In Depositor Behaviormentioning

confidence: 99%

Section: A Event Studies On Regional and National Panicsmentioning

confidence: 99%

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Network Contagion and Interbank Amplification during the Great Depression

Mitchener

Richardson

2019

Journal of Political Economy

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“…Davison and Ramirez (2014) show that local banking panics were common during the 1920s Carlson, Mitchener, and Richardson (2011). describe how the Federal Reserve Bank of Atlanta successfully ended a panic in Florida in 1929, andRichardson and Troost (2009) show that the impact of Great Depression panics on local economic conditions depended on the responsiveness of individual Federal Reserve Banks to them.…”

mentioning

confidence: 99%

The Founding of the Federal Reserve, the Great Depression, and the Evolution of the U.S. Interbank Network

Jaremski¹,

Wheelock²

2019

J. Econ. Hist.

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Financial network structure is an important determinant of systemic risk. This article examines how the U.S. interbank network evolved over a long and important period that included two key events: the founding of the Federal Reserve and the Great Depression. Banks established connections to correspondents that joined the Federal Reserve in cities with Fed offices, initially reducing overall network concentration. The network became even more focused on Fed cities during the Depression, as survival rates were higher for banks with more existing connections to Fed cities, and as survivors established new connections to those cities over time.

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