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Bank Asset Liquidation and the Propagation of the U.S. Great Depression

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Author Info
Anari, Ali
Kolari, James
Mason, Joseph
Abstract

We hypothesize that financial disintermediation during and after the Great Depression arose from the slow liquidation of failed-bank deposits. Empirical results from incorporating the stock of failed national bank deposits for the period 1921-40 in vector autoregression (VAR) models suggest that the stock of deposits in closed banks undergoing liquidation is as important as money stock in terms of explaining output changes over forecast horizons from one to three years. Hence, we infer that the dynamic effects of banking sector shocks were cumulative and pervasive during and after the Depression.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 37 (2005)
Issue (Month): 4 (August)
Pages: 753-73
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Handle: RePEc:mcb:jmoncb:v:37:y:2005:i:4:p:753-73

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Shin-ichi Fukuda & Munehisa Kasuya & Kentaro Akashi, 2008. "Impaired Bank Health and Default Risk," CIRJE F-Series CIRJE-F-564, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  2. Charles W. Calomiris & Stanley D. Longhofer & William Miles, 2008. "The Foreclosure-House Price Nexus: Lessons from the 2007-2008 Housing Turmoil," NBER Working Papers 14294, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Mark Carlson, 2008. "Alternatives for distressed banks and the panics of the Great Depression," Finance and Economics Discussion Series 2008-07, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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