Panic and propagation in 1873: A network analytic approach

Daniel Ladley and Peter Rousseau

Journal of Banking & Finance, 2023, vol. 151, issue C

Abstract: We assess systemic risk in the U.S. banking system before and after the Panic of 1873, using a combination of linear programming and computational optimization to estimate the interbank network. We impose liquidity shocks resembling those of 1873, and find the network captures the distribution of interbank deposits a year later. The network predicts banks likely to panic in the crisis, and those banks see their balance sheets weaken in the year after the crisis more than others. The results shed light on the nature and regional pattern of withdrawals in a classic 19th-century U.S. financial crisis.

Keywords: Panic of 1873; National banking system; Systemic risk; Network (search for similar items in EconPapers)
JEL-codes: C63 G21 N11 N21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:151:y:2023:i:c:s0378426623000699

DOI: 10.1016/j.jbankfin.2023.106844

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