Real Shock, Monetary Aftershock: The San Francisco Earthquake and the Panic of 1907

Kerry A. Odell and Marc Weidenmier ()

No 9176, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Economists have long studied the relationship between the real and monetary sectors. We examine the macroeconomic effects of the 1906 San Francisco earthquake, a shock that immediately reduced United States. GNP by 1.5-1.8 percentage points. The quake's impact manifested itself in gold flows, as British insurance companies paid their San Francisco claims out of home funds in the fall of 1906. The capital outflow prompted the Bank of England to raise interest rates and discriminate against American finance bills. British bank policy pushed the US into recession and set the stage for the 1907 financial crisis. The 1907 panic led to the formation of the National Monetary Commission whose proposals recommended the creation of the Federal Reserve. In this study, we identify the San Francisco earthquake as the shock that triggered the chain of events that culminated in the panic of 1907.

JEL-codes: E32 E58 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-cba, nep-pke and nep-rmg
Note: DAE ME
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Citations: View citations in EconPapers (23)

Published as Odell, Kerry A. and Marc D. Weidenmier. "Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake And The Panic Of 1907," Journal of Economic History, 2004, v64(4,Dec), 1002-1027.

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