Interbank Connections, Contagion and Bank Distress in the Great Depression
Matthew Jaremski () and
David Wheelock ()
No 2019-1, Working Papers from Federal Reserve Bank of St. Louis
Liquidity shocks transmitted through interbank connections contributed to bank distress during the Great Depression. New data on interbank connections reveal that banks were much more likely to close when their correspondents closed. Further, after the Federal Reserve was established, banks’ management of cash and capital buffers was less responsive to network risk, suggesting that banks expected the Fed to reduce network risk. Because the Fed’s presence removed the incentives for the most systemically important banks to maintain capital and cash buffers that had protected against liquidity risk, it likely contributed to the banking system’s vulnerability to contagion during the Depression.
Keywords: Bank Contagion; Great Depression; Interbank Networks; Liquidity Risk; Federal Reserve System (search for similar items in EconPapers)
JEL-codes: G21 L14 N22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2019/2019-001.pdf Full text (application/pdf)
https://doi.org/10.20955/wp.2019.001 https://doi.org/10.20955/wp.2019.001 (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2019-001
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Anna Oates ().