Contagious bank runs in the free banking period

Gerald Dwyer and Iftekhar Hasan

No 1989-002, Working Papers from Federal Reserve Bank of St. Louis

Abstract: In the free banking period in the United States, banks issued private banknotes without discretionary restriction of entry into banking. Previous research suggests that specific aspects of the free banking laws account for banks' difficulties, losses to noteholders, and the attendant relatively large number of banks closed. In this paper, we examine the hypothesis that contagious is: 1. the actual sequence of events in two episodes in which numerous banks closed; and 2. a statistical analysis of four episodes. The evidence is consistent with the hypothesis that contagious bank runs account of many of the banks closing. Bankers' use of measures such as restrictions of convertibility and joint guarantees was ad hoc and apparently less effective in this period than after the Civil War.

Keywords: Banks and banking - History; Bank failures (search for similar items in EconPapers)
Date: 1989
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Working Paper: CONTAGIOUS BANK RUNS IN THE FREE BANKING PERIOD (1988)
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DOI: 10.20955/wp.1989.002

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