Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-28T08:46:36.995Z Has data issue: false hasContentIssue false
  • English
  • Français

The Shoe That Didn't Drop: Explaining Banking Stability During the Great Depression

Published online by Cambridge University Press:  03 March 2009

Richard S. Grossman
Richard S. Grossman
Affiliation:
Assistant Professor of Economics, Wesleyan University, Middletown, CT 06459–6067.
Get access Rights & Permissions [Opens in a new window]

Abstract

This article attempts to account for the exceptional stability exhibited by the banking systems of Britain, Canada, and ten other countries during the Great Depression. It considers three possible explanations of stability—the structure of the commercial banking system, macroeconomic policy and performance, and lender of last resort behavior—employing data from 25 countries across Europe and North America. The results suggest that macroeconomic policy—especially exchange-rate policy—and banking structure, but not lenders of last resort, were systematically responsible for banking stability.

Type
Articles
Information
The Journal of Economic History , Volume 54 , Issue 3 , September 1994 , pp. 654 - 682
Copyright
Copyright © The Economic History Association 1994

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Adkins, Lee, “Small Sample Inference in the Probit Model” (manuscript, Oklahoma State University, Stillwater, 1991).Google Scholar
Bagehot, Walter, Lombard Street (London, 1910).Google Scholar
Balogh, Thomas, Studies in Financial Organization (Cambridge, 1950).Google Scholar
The Bankers' Almanac and Year Book, 1930 (West Sussex, 1931).Google Scholar
Bernanke, Ben, “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression,” American Economic Review, 73 (06 1983), pp. 257–76.Google Scholar
Bernanke, Ben, and James, Harold, “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison,” in Hubbard, R. Glenn, ed., Financial Markets and Financial Crises (Chicago, 1991), pp. 33–68.Google Scholar
Beyen, J. W., Money in a Maelstrom (New York, 1949).Google Scholar
Cagan, Phillip, Determinants and Effects of Changes in the Stock of Money, 1875–1960 (New York, 1965).Google Scholar
Calomiris, Charles, and Gorton, Gary, “The Origins of Banking Panics: Models, Facts, and Bank Regulation,” in Hubbard, R. Glenn, ed., Financial Markets and Financial Crises (Chicago, 1991), pp. 109–74.Google Scholar
Calomiris, Charles, and Schweikart, Larry, “The Panic of 1857: Origins, Transmission, and Containment,” this Journal, 51 (12 1991), pp. 807–34.Google Scholar
Calomiris, Charles, “The Costs of Rejecting Universal Banking: American Finance in the German Mirror, 1870–1914” (manuscript, University of Illinois, Urbana, 1992).Google Scholar
Committee on Finance and Industry (Macmillan Committee), Report (London, 1931).Google Scholar
Comptroller of the Currency, Annual Report (Washington, various years).Google Scholar
Crick, W. F., and Wadsworth, J. E., A Hundred Years of Joint Stock Banking (London, 1936).Google Scholar
Drummond, Ian, “Why Canadian Banks Did Not Collapse in the 1930s,” in James, Harold, Lindgren, Håkan, and Teichova, Alice, eds., The Role of Banks in the Interwar Economy (Cambridge, U.K., 1991), pp. 232–50.Google Scholar
Efron, Bradley, The Jackknife, the Bootstrap, and Other Resampling Plans (Philadelphia, 1982).Google Scholar
Eichengreen, Barry, Golden Fetters (Oxford, 1992).Google Scholar
Eichengreen, Barry, “The Bank of France and the Sterilization of Gold, 1926–32,”, Explorations in Economic History, 23 (01 1986), pp. 56–84.Google Scholar
Eichengreen, Barry, and Portes, Richard, “The Anatomy of Financial Crises,” in Portes, Richard and Swoboda, Alexander, eds., Threats to International Financial Stability (Cambridge, U.K., 1987), pp. 10–57.Google Scholar
Eichengreen, Barry, and Sachs, Jeffrey, “Exchange Rates and Economic Recovery in the 1930s,” this Journal, 45 (12 1985), pp. 925–46.Google Scholar
Fisher, Irving, “The Debt-Deflation Theory of Great Depressions,” Econometrica, 1 (10 1933), pp. 337–57.Google Scholar
Friedman, Milton, and Schwartz, Anna, A Monetary History of the United States, 1867–1960 (Princeton, NJ, 1963).Google Scholar
Goodhart, Charles, The Evolution of Central Banks (Cambridge, MA, 1988).Google Scholar
Gorton, Gary, “Clearinghouses and the Origin of Central Banking in the United States,” this Journal, 45 (06 1985), pp. 277–83.Google Scholar
Humphrey, Thomas, “The Classical Concept of the Lender of Last Resort,” Federal Reserve Bank of Richmond Economic Review, 61 (01/02 1975), pp. 2–9.Google Scholar
James, Harold, The German Slump: Politics and Economics, 1924–1936 (Oxford, 1986).Google Scholar
James, Harold, “Financial Flows Across Frontiers During the Interwar Depression,” Economic History Review, 45 (08 1992), pp. 594–613.Google Scholar
Johnson, Joseph, The Canadian Banking System (Washington, 1910).Google Scholar
Kindleberger, Charles, The World in Depression, 1929–1939 (Berkeley, 1973).Google Scholar
Kindleberger, Charles, Manias, Panics, and Crashes (New York, 1978).CrossRefGoogle Scholar
Laderman, Elizabeth, Schmidt, Ronald, and Zimmerman, Gary, “Location, Branching, and Bank Portfolio Diversification: The Case of Agricultural Lending,” Federal Reserve Bank of San Francisco Economic Review (Winter 1991), pp. 24–38.Google Scholar
Larsson, Mats, “State, Banks and Industry in Sweden, with Some Reference to the Scandinavian Countries,” in James, Harold, Lindgren, Håkan, and Teichova, Alice, eds., The Role of Banks in the Interwar Economy (Cambridge, 1991), pp. 80–103.Google Scholar
League of Nations, Commercial Banks, 1925–33 (Geneva, 1934).Google Scholar
League of Nations, Commercial Banks, 1929–34 (Geneva, 1935).Google Scholar
League of Nations, Statistical Year-Book (Geneva, various years).Google Scholar
League of Nations, Monetary Review (Geneva, 1938).Google Scholar
League of Nations, Commercial and Central Banks (Geneva, 1938).Google Scholar
Lewis, W. Arthur, Economic Survey, 1919–1939 (London, 1981).Google Scholar
Lovell, Michael C., “The Role of the Bank of England as Lender of Last Resort in the Crises of the Eighteenth Century,” Explorations in Entrepreneurial History, 10 (10 1957), pp. 8–21.Google Scholar
McIvor, R. Craig, Canadian Monetary, Banking and Fiscal Development (Toronto, 1958).Google Scholar
Madden, John T., and Nadler, Marcus, The International Money Markets (New York, 1935).Google Scholar
Mazower, Mark, “Banking and Economic Development in Interwar Greece,” in James, Harold, Lindgren, Håkan, and Teichova, Alice, eds., The Role of Banks in the Interwar Economy (Cambridge, 1991), pp. 206–31.Google Scholar
Mengle, David, “The Case for Interstate Branch Banking,” Federal Reserve Bank of Richmond Economic Review, 76 (11/12 1990), pp. 3–16.Google Scholar
Minsky, Hyman, Inflation, Recession and Economic Policy (New York, 1982).Google Scholar
Miron, Jeffrey, “Financial Panics, the Seasonality of the Nominal Interest Rate, and the Founding of the Fed,” American Economic Review, 76 (03 1986), pp. 125–40.Google Scholar
Mishkin, Frederick, “Anatomy of a Financial Crisis” (manuscript, NBER, Cambridge, MA, 1991).CrossRefGoogle Scholar
Mitchell, B. R., European Historical Statistics, 1750–1970 (New York, 1978).Google Scholar
Nordvik, Helge, “Scandinavian Banking in the Interwar Period: A Case Study of the Norwegian Banking System and Banking Policy in a Scandinavian Perspective” (manuscript, Sandvika, Norway, 1992).Google Scholar
Reis, Jaime, “Portuguese Banking in the Inter-War Period,” (manuscript, Lisbon, Portugal, 1992).Google Scholar
Romer, Christina, and Romer, David, “Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz,” NBER Macroeconomics Annual, 4 (1989), pp. 121–70.Google Scholar
Sayers, Richard, The Bank of England, 1891–1944 (Cambridge, 1976).Google Scholar
Shearer, Ronald, and Clark, Carolyn, “Canada and the Interwar Gold Standard, 1920–35: Monetary Policy without a Central Bank,” in Bordo, Michael and Schwartz, Anna, eds., A Retrospective on the Classical Gold Standard, 1821–1931 (Chicago, 1984), pp. 277–302.Google Scholar
Sprague, O. M. W., History of Crises Under the National Banking System (Washington, 1910).Google Scholar
Temin, Peter, Did Monetary Forces Cause the Great Depression? (New York, 1976).Google Scholar
Temin, Peter, Lessons From the Great Depression (Cambridge, MA, 1989).Google Scholar
Thornton, Henry, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (London, 1802; reprint, New York, 1939).Google Scholar
Tortella, Gabriel, and Palafox, Jordi, “Banking and Industry in Spain, 1918–1936,” The Journal of European Economic History, 13 (Fall 1984), pp. 81–111.Google Scholar
Truptil, R. J., British Banks and the London Money Market (London, 1936).Google Scholar
U.S. Department of Commerce, Historical Statistics of the United States (Washington, DC, 1976).Google Scholar
U.S. Treasury, Modernizing the Financial System (Washington, 1991).Google Scholar
Urquhart, M. C., ed., Historical Statistics of Canada (Toronto, 1965).Google Scholar
Vanthemsche, Guy, “State, Banks and Industry in Belgium and The Netherlands, 1919–1939,” in James, Harold, Lindgren, Håkan, and Teichova, Alice, eds., The Role of Banks in the Interwar Economy (Cambridge, 1991), pp. 104–21.Google Scholar
White, Eugene N., “Before the Glass-Steagall Act: An Analysis of the Investment Banking Activities of National Banks,” Explorations in Economic History, 23 (01 1986), pp. 33–55.CrossRefGoogle Scholar
Wicker, Elmus, “A Reconsideration of the Causes of the Banking Panic of 1930,” this Journal 40 (09 1980), pp. 571–83.Google Scholar