Crisis? What Crisis? Currency vs. Banking in the Financial Crisis of 1931
AbstractThis paper examines the role of currency and banking in the German financial crisis of 1931 for both Germany and the U.S. We specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies. We find that monetary transmission through the Gold Standard played only a minor role in causing and propagating the crisis, while financial distress was important. We also find evidence of crisis propagation from Germany to the U.S. via the banking channel. Banking distress in both economies was apparently not endogenous to monetary policy. Results confirm Bernanke's (1983) conjecture that an independent, non-monetary financial channel of crisis propagation was operative in the Great Depression.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2010-014.
Length: 59 pages
Date of creation: Feb 2010
Date of revision:
Great Depression; 1931 financial crisis; international business cycle transmission; Bayesian factor analysis; currency; banking;
Other versions of this item:
- Albrecht Ritschl & Samad Salferaz, 2010. "Crisis? What Crisis? Currency vs. Banking in the Financial Crisis of 1931," CEP Discussion Papers dp0977, Centre for Economic Performance, LSE.
- Ritschl, Albrecht & Sarferaz, Samad, 2009. "Crisis? What Crisis? Currency vs. Banking in the Financial Crisis of 1931," CEPR Discussion Papers 7610, C.E.P.R. Discussion Papers.
- N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-HIS-2010-04-17 (Business, Economic & Financial History)
- NEP-MON-2010-04-17 (Monetary Economics)
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