This time is different: Causes and consequences of British banking instability over the long run

Gareth Campbell (), Christopher Coyle and John Turner ()

Journal of Financial Stability, 2016, vol. 27, issue C, 74-94

Abstract: This paper addresses three questions: (1) How severe were the episodes of banking instability experienced by the UK over the past two centuries? (2) What have been the macroeconomic indicators of UK banking instability? and (3) What have been the consequences of UK banking instability for the cost of credit? Using a unique dataset of bank share prices from 1830 to 2010 to assess the stability of the UK banking system, we find that banking instability has grown more severe since the 1970s. We also find that interest rates, inflation, lending growth, and equity prices are consistent macroeconomic indicators of UK banking instability over the long run. Furthermore, utilising a unique dataset of corporate-bond yields for the period 1860 to 2010, we find that there is a significant long-run relationship between banking instability and the credit-risk premium faced by businesses.

Keywords: Banking crises; Cost of credit; Financial instability (search for similar items in EconPapers)
JEL-codes: G10 G21 N13 N14 N23 N24 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:27:y:2016:i:c:p:74-94

DOI: 10.1016/j.jfs.2016.09.007

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