Banking on the Boom, Tripped by the Bust: Banks and the World War I Agricultural Price Shock

Matthew Jaremski and David Wheelock

No 25159, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How do banks respond to asset booms? This paper examines i) how U.S. banks responded to the World War I farmland boom; ii) the impact of regulation; and iii) how bank closures exacerbated the post-war bust. The boom encouraged new bank formation and balance sheet expansion (especially by new banks). Deposit insurance amplified the impact of rising crop prices on bank portfolios, while higher minimum capital requirements dampened the effects. Banks that responded most aggressively to the asset boom had a higher probability of closing in the bust, and counties with more bank closures experienced larger declines in land prices.

JEL-codes: E58 N21 N22 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-agr, nep-his, nep-ias and nep-mac
Note: DAE
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Citations: View citations in EconPapers (2)

Published as MATTHEW JAREMSKI & DAVID C. WHEELOCK, 2020. "Banking on the Boom, Tripped by the Bust: Banks and the World War I Agricultural Price Shock," Journal of Money, Credit and Banking, vol 52(7), pages 1719-1754.

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Journal Article: Banking on the Boom, Tripped by the Bust: Banks and the World War I Agricultural Price Shock (2020)
Working Paper: Banking on the Boom, Tripped by the Bust: Banks and the World War I Agricultural Price Shock (2017)
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