The Role of Liquidity and Implicit Guarantees in the German Twin Crisis of 1931
Abstract
Using monthly balance-sheet data of all major German credit banks, we analyze deposit with-drawals and bank failures in the German banking and currency crisis of 1931. We find that de-posit withdrawals were driven by the run on the currency, but were also related to banks’ liquidity positions; that branch banks were no more stable than unit banks; and that large banks were privileged, being bailed out and receiving preferential access to the discount window. These findings underline the importance of liquidity and implicit guarantees in twin crises, while they question the benefits of branching in such crises.Download Info
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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2005_5.Length: 37 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:mpg:wpaper:2005_05
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Related research
Keywords: Twin crises; liquidity; implicit guarantees; “too big to fail”;Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Schnabel, Isabel & Körner, Tobias, 2012. "Abolishing Public Guarantees in the Absence of Market Discipline," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 65401, Verein für Socialpolitik / German Economic Association.
- Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2011.
"Competition, Risk-shifting, and Public Bail-out Policies,"
Review of Financial Studies,
Society for Financial Studies, vol. 24(6), pages 2084-2120.
- Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2010. "Competition, Risk-Shifting,and Public Bail-out Policies," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_05, Max Planck Institute for Research on Collective Goods.
- Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2010. "Competition, Risk-Shifting, and Public Bail-out Policies," Working Papers 1003, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 14 Jan 2010.
- Ulrich Bindseil & Adalbert Winkler, 2012. "Dual liquidity crises under alternative monetary frameworks: a financial accounts perspective," Working Paper Series 1478, European Central Bank.
- Admati, Anat R. & DeMarzo, Peter M. & Hellwig, Martin F. & Pfleiderer, Paul, 2010.
"Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Expensive,"
Research Papers
2065, Stanford University, Graduate School of Business.
- Anat R. Admati & Peter M. DeMarzo & Martin F. Hellwig & Paul Pfleiderer, 2010. "Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_42, Max Planck Institute for Research on Collective Goods.
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