Bank Lending and Deposit Crunches during the Great Depression

Kris James Mitchener and Gary Richardson

No 32783, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Bank distress was a defining feature of the Great Depression in the United States. Most banks, however, weathered the storm and remained in operation throughout the contraction. We show that surviving banks cut lending when depositors withdrew funds en masse during panics. This panic-induced decline in lending explains about one-third of the reduction in aggregate commercial bank lending between 1929 and 1932, more than twice as much as attributed to the failure of banks.

JEL-codes: N1 N10 N12 N2 N22 (search for similar items in EconPapers)
Date: 2024-08
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