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Currency Versus Banking In The Financial Crisis Of 1931

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  • Albrecht Ritschl
  • Samad Sarferaz

Abstract

During the 1920s, Germany was the world's largest capital importer, financing reparations through U.S. credits. We examine financial channels in crisis transmission between these two countries around the German financial crisis of 1931. We specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies. We find substantial crisis transmission from Germany to the United States via the financial channel, while monetary or financial crisis transmission from the United States to Germany was weak. We also find major real effects of the 1931 crisis on both economies, again transmitted via the financial channel.

Suggested Citation

  • Albrecht Ritschl & Samad Sarferaz, 2014. "Currency Versus Banking In The Financial Crisis Of 1931," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 349-373, May.
    • Handle: RePEc:wly:iecrev:v:55:y:2014:i:2:p:349-373
    DOI: 10.1111/iere.12052
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