Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve

Mark Carlson and David Wheelock

American Economic Review, 2016, vol. 106, issue 5, 533-37

Abstract: This paper examines the impact of the Federal Reserve's founding on seasonal pressures and contagion risk in the interbank system. Deposit flows among classes of banks were highly seasonal before 1914; amplitude and timing varied regionally. Panics interrupted normal flows as banks throughout the country sought funds from the central money markets simultaneously. Seasonal pressures and contagion risk in the system were lower by the 1920s, when the Fed provided seasonal liquidity and reserves. Panics returned in the 1930s, due in part to shocks from nonmember banks and because the Fed's decentralized structure hampered a vigorous response to national crises.

JEL-codes: E32 E44 E58 G01 G21 G28 N22 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.p20161044
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Citations: View citations in EconPapers (14)

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Working Paper: Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve (2015)
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