Contagious Bank Runs In The Free Banking Period
AbstractIn the free banking period in the United States, banks issued private banknotes without discretionary restriction of entry into banking. Previous research suggests that specific aspects of the free banking laws account for banks' difficulties, losses to noteholders, and the attendant relatively large number of banks closed. In this paper, we examine the hypothesis that contagious is: 1. the actual sequence of events in two episodes in which numerous banks closed; and 2. a statistical analysis of four episodes. The evidence is consistent with the hypothesis that contagious bank runs account of many of the banks closing. Bankers' use of measures such as restrictions of convertibility and joint guarantees was ad hoc and apparently less effective in this period than after the Civil War.
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Bibliographic InfoPaper provided by Houston - Department of Economics in its series Papers with number 22.
Length: 30 pages
Date of creation: 1988
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Postal: UNIVERSITY OF HOUSTON, DEPARTMENT OF ECONOMICS, COLLEGE OF SOCIAL SCIENCES, HOUSTON TEXAS 77023 U.S.A.
Web page: http://www.class.uh.edu/econ/
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banking systems ; statistical analysis ; law;
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- Michael D. Bordo, 1990. "The lender of last resort : alternative views and historical experience," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 18-29.
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