The Role of Liquidity and Implicit Guarantees in the German Twin Crisis of 1931

Isabel Schnabel

No 2005_5, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Using monthly balance-sheet data of all major German credit banks, we analyze deposit with-drawals and bank failures in the German banking and currency crisis of 1931. We find that de-posit withdrawals were driven by the run on the currency, but were also related to banks’ liquidity positions; that branch banks were no more stable than unit banks; and that large banks were privileged, being bailed out and receiving preferential access to the discount window. These findings underline the importance of liquidity and implicit guarantees in twin crises, while they question the benefits of branching in such crises.

Keywords: Twin crises; liquidity; implicit guarantees; “too big to fail” (search for similar items in EconPapers)
JEL-codes: C34 E5 G21 N24 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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