Bank Regulation, Network Topology, and Systemic Risk: Evidence from the Great Depression

Sanjiv Das (), Kris James Mitchener and Angela Vossmeyer

No 25405, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how bank regulation interacts with network topology to influence systemic stability. Employing unique hand-collected data on the correspondent network for all U.S. banks on the eve of the Great Depression and a methodology that captures bank credit risk and network position, we explore how the pyramid-shaped network topology was inherently fragile and systemically risky. We measure its contribution to banking distress in the early 1930s, and show that a bank's network position as well as the risk of its network neighbors are strong predictors of bank survivorship. Institutional alternatives, such as branch banking, and alternative topologies appear to deliver networks that are more stable than the network that existed in 1929.

JEL-codes: E42 E44 G01 G18 G21 L1 N12 N22 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-ban, nep-his, nep-mac and nep-rmg
Note: DAE
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Citations: View citations in EconPapers (5)

Published as SANJIV R. DAS & KRIS JAMES MITCHENER & ANGELA VOSSMEYER, 2022. "Bank Regulation, Network Topology, and Systemic Risk: Evidence from the Great Depression," Journal of Money, Credit and Banking, vol 54(5), pages 1261-1312.

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Working Paper: Bank Regulation, Network Topology, and Systemic Risk: Evidence from the Great Depression (2018)
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