Credit availability and the collapse of the banking sector in the 1930s

Mark Carlson and Jonathan Rose

No 2011-38, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines the mechanism through which banking sector distress affects the availability of credit. We use the experience of the United States during the Great Depression, a period of intense bank distress, to conduct our analysis. We utilize previously neglected data from a 1934 survey conducted by the Federal Reserve System of both banks and Chambers of Commerce regarding the availability of credit, and examine which aspects of the banking system collapse affected credit availability as indicated by the survey. A number of scholars have posited different ways that bank distress constrained credit availability and impacted economic activity during the 1930s; however, the empirical evidence regarding these channels is modest. In this study, we find that bank failures had the most dominant impact, but there is also some evidence for the importance of funding constraints from deposit outflows and of protracted deposit liquidation.

Keywords: Depressions; Bank failures - United States; Bank loans - United States (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-his, nep-hme and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Credit Availability and the Collapse of the Banking Sector in the 1930s (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2011-38

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