Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or...)?

Michael Bordo, Angela Redish and Hugh Rockoff

No 17312, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk -- the mortgage market and investment banking -- and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained.

JEL-codes: N20 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cba, nep-his, nep-hpe, nep-mon, nep-pke and nep-reg
Note: DAE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Published as Michael D. Bordo & Angela Redish & Hugh Rockoff, 2015. "Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or …)?," The Economic History Review, vol 68(1), pages 218-243.

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