Journal of Banking & Finance Vol. 33 No. 12 2009
Bank fragility, “money under the mattress”, and long-run growth: US evidence from the “perfect” Panic of 1893
Abstract
This paper examines how the US financial crisis of 1893 affected state output growth between 1900 and 1930. The results indicate that a 1% increase in bank instability reduced output growth by 2–5%. A comparison of Nebraska, which had one of the highest bank failure rates, with West Virginia, which did not experience a single bank failure, reveals that disintermediation affected growth through a portfolio change among savers: people simply stopped trusting banks. Time series evidence from newspapers indicates that articles containing the words “money hidden” significantly increase after banking crises, then slowly die out.
- DOI
- 10.1016/j.jbankfin.2009.05.020
- Volume
- 33
- Issue
- 12
- Pages
- 2185-2198
- Language
- en
- Sources
- crossref openalex bibtex:phds-export.bib