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Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933

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  • Gary Richardson
  • William Troost

Abstract

The Federal Reserve Act of 1913 divided Mississippi between the 6th (Atlanta) and 8th (St. Louis) Federal Reserve Districts. Before and during the Great Depression, these districts' policies differed. The Atlanta Fed championed monetary activism and the extension of credit to troubled banks. The St. Louis Fed adhered to the doctrine of real bills and eschewed expansionary initiatives. Outcomes differed across districts. In the 6th District, banks failed at lower rates than in the 8th District, particularly during the banking panic in the fall of 1930. The pattern suggests that discount lending reduced failure rates during periods of panic. Historical evidence and statistical analysis corroborates this conclusion.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12591.

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Date of creation: Oct 2006
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Publication status: published as Richardson, Gary and William Troost. "Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933." Journal of Political Economy 117, 6 (2009): 1031-1073.
Handle: RePEc:nbr:nberwo:12591

Note: DAE ME
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  1. Lawrence J. Christiano & Roberto Motto, 2004. "The Great Depression and the Friedman-Schwartz Hypothesis," Computing in Economics and Finance 2004, Society for Computational Economics 169, Society for Computational Economics.
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Cited by:
  1. Gorton, Gary B., 2008. "The panic of 2007," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 131-262.
  2. Nicolae Dardac & Adriana Giba, 2011. "Systemic Financial Crisis: A Cluster Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 53-64.
  3. Natacha Postel-Vinay, 2011. "From a “normal recession” to the “Great Depression”: finding the turning point in Chicago bank portfolios, 1923-1933," Economic History Working Papers, London School of Economics and Political Science, Department of Economic History 35518, London School of Economics and Political Science, Department of Economic History.
  4. Tchana Tchana, Fulbert, 2012. "The welfare cost of banking regulation," Economic Modelling, Elsevier, Elsevier, vol. 29(2), pages 217-232.
  5. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
  6. Gary Gorton, 2008. "The Subprime Panic," Yale School of Management Working Papers, Yale School of Management amz2504, Yale School of Management.
  7. Gary Richardson & Patrick Van Horn, 2011. "When the Music Stopped: Transatlantic Contagion During the Financial Crisis of 1931," NBER Working Papers 17437, National Bureau of Economic Research, Inc.
  8. Michael D. Bordo & John Landon-Lane, 2010. "The Lessons from the Banking Panics in the United States in the 1930s for the Financial Crisis of 2007-2008," NBER Working Papers 16365, National Bureau of Economic Research, Inc.
  9. Gary B. Gorton, 2008. "The Panic of 2007," NBER Working Papers 14358, National Bureau of Economic Research, Inc.

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