The highs and the lows: Bank failures in Sweden through inflation and deflation, 1914-1926

Sean Kenny, Anders Ögren and Liang Zhao

No 23-03, QUCEH Working Paper Series from Queen's University Belfast, Queen's University Centre for Economic History

Abstract: This paper revisits the Swedish banking crisis (1919-26) that materialized as post war deflation replaced wartime inflation (1914-18). Inspired by Fisher's 'debt deflation theory', we employ survival analysis to 'predict' which banks would fail, given certain ex-ante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in i) leverage, ii) weaker collateral loans and iii) foreign borrowing during the boom were all associated with bank failure in post-war Sweden (1919-26).

Keywords: banking crisis; survival analysis; early warning indicators; debt deflation; maturity mismatch; Sweden (search for similar items in EconPapers)
JEL-codes: E58 G01 G21 G28 N24 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-his and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:qucehw:202303

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