Bank fragility, "money under the mattress", and long-run growth: US evidence from the "perfect" Panic of 1893

Carlos Ramirez

Journal of Banking & Finance, 2009, vol. 33, issue 12, 2185-2198

Abstract: This paper examines how the US financial crisis of 1893 affected state output growth between 1900 and 1930. The results indicate that a 1% increase in bank instability reduced output growth by 2-5%. A comparison of Nebraska, which had one of the highest bank failure rates, with West Virginia, which did not experience a single bank failure, reveals that disintermediation affected growth through a portfolio change among savers: people simply stopped trusting banks. Time series evidence from newspapers indicates that articles containing the words "money hidden" significantly increase after banking crises, then slowly die out.

Keywords: Bank; failures; Panic; of; 1893; Convergence; Finance-growth; nexus; Nebraska; West; Virginia; Deposits; Money; hidden (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:12:p:2185-2198

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