Banking Crises without Panics

Matthew Baron, Emil Verner and Wei Xiong

No 26908, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine historical banking crises through the lens of bank equity declines, which cover a broad sample of episodes of banking distress both with and without banking panics. To do this, we construct a new dataset on bank equity returns and narrative information on banking panics for 46 countries over the period 1870-2016. We find that even in the absence of panics, large bank equity declines are associated with substantial credit contractions and output gaps. While panics can be an important amplification mechanism, our results indicate that panics are not necessary for banking crises to have severe economic consequences. Furthermore, panics tend to be preceded by large bank equity declines, suggesting that panics are the result, rather than the cause, of earlier bank losses. We also use bank equity returns to uncover a number of forgotten historical banking crises and to create a banking crisis chronology that distinguishes between bank equity losses and panics.

JEL-codes: G01 G21 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-his and nep-mon
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Citations: View citations in EconPapers (34)

Published as Matthew Baron & Emil Verner & Wei Xiong, 2020. "Banking Crises Without Panics*," The Quarterly Journal of Economics, vol 136(1), pages 51-113.

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