The German Twin Crisis of 1931

Isabel Schnabel

The Journal of Economic History, 2004, vol. 64, issue 3, 822-871

Abstract: Using information on banks' balance sheets, I analyze the causal links between the banking and currency problems in the German crisis of 1931. I find that the crisis had two independent causes: Political shocks triggered a run on the Reichsmark; and the excessive risk-taking by banks that were “too big to fail” led to a run on banks. Due to the high level of foreign debt in the banking system, the run on the currency and the deposit withdrawals reinforced each other in a vicious circle and resulted in a banking panic and the abandonment of the gold standard.

Date: 2004
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Working Paper: The German twin crisis of 1931 (2002)
Working Paper: The German Twin Crisis of 1931 (2002)
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