Government-made bank distress: Industrialisation policies and the Russian financial crisis of 1899-1902

Nikita Lychakov

No 2018-11, QUCEH Working Paper Series from Queen's University Belfast, Queen's University Centre for Economic History

Abstract: How can industrial policies lead to bank distress? In the 1890s, when undergoing rapid state-led industrialisation, the Russian Empire grew by foreign capital inflows into national debt and by state procurement of industrial output. Concurrently, state policies incentivised, but did not compel, commercial banks to finance industry. In 1899, the inflow of foreign capital fell sharply, initiating a financial crisis. Using newly-collected historical data and extensive narrative evidence, I find the banks which experienced greater distress in the crisis had more personal connections to the government officials who were close to the epicentre of policymaking. Moreover, these banks had more personal ties to the companies which had been most-stimulated by state policies to expand production. Taken together, these two findings suggest that national development policies had a destabilising impact on bank performance.

Keywords: financial crises; bank failures; development policies; political economy; Russia (search for similar items in EconPapers)
JEL-codes: G01 L5 O25 P16 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cis and nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:qucehw:201811

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