Banking Crises in Historical Perspective

Carola Frydman and Chenzi Xu
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Chenzi Xu: Stanford Graduate School of Business, Stanford University, Stanford, California, USA

Annual Review of Financial Economics, 2023, vol. 15, issue 1, 265-290

Abstract: This article surveys the recent empirical literature on historical banking crises, defined as events taking place before 1980. Advances in data collection and identification have provided new insights into the causes and consequences of crises both immediately and over the long run. We highlight three overarching threads that emerge from the literature: First, leverage in the financial system is a systematic precursor to crises; second, crises have sizable negative effects on the real economy; and third, government interventions can ameliorate these effects. Contrasting historical episodes reveals that the process of crisis formation and evolution varies significantly across time and space. Thus, we also highlight specific institutions, regulations, and historical contexts that give rise to these divergent experiences. We conclude by identifying important gaps in the literature and discussing avenues for future research.

Keywords: banking crises; intermediation; lender of last resort; financial stability; leverage; historical lessons (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 G21 N10 N20 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1146/annurev-financial-100121-114859

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