American Economic Review Vol. 93 No. 5 2003

Fundamentals, Panics, and Bank Distress During the Depression

Charles W. Calomiris¹; Joseph R. Mason²

¹ Graduate School of Business, 601 Uris Hall, Columbia University, 3022 Broadway, New York, NY 10027, National Bureau of Economic Research, and American Enterprise Institute. · ² LeBow College of Business, Drexel University, 3141 Chestnut Street, Philadelphia, PA 19104, and Wharton Financial Institutions Center.

Abstract

We assemble bank-level and other data for Fed member banks to model determinants of bank failure. Fundamentals explain bank failure risk well. The first two Friedman-Schwartz crises are not associated with positive unexplained residual failure risk, or increased importance of bank illiquidity for forecasting failure. The third Friedman-Schwartz crisis is more ambiguous, but increased residual failure risk is small in the aggregate. The final crisis (early 1933) saw a large unexplained increase in bank failure risk. Local contagion and illiquidity may have played a role in pre-1933 bank failures, even though those effects were not large in their aggregate impact.

DOI

10.1257/000282803322655473

Volume

93

Issue

5

Pages

1615-1647

Language

en

Sources

crossref bibtex:phds-export.bib openalex

Cite

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