Money versus Credit Rationing: Evidence for the National Banking Era, 1880-1914
AbstractIn this paper we examine the evidence for two competing views of how monetary and financial disturbances influenced the real economy during the national banking era, 1880-1914. According to the monetarist view, monetary disturbances affected the real economy through changes on the liability side of the banking system's balance sheet independent of the composition of bank portfolios. According to the credit rationing view, equilibrium credit rationing in a world of asymmetric information can explain short-run fluctuations in real output. Using structural VARs we incorporate monetary variables in credit models and credit variables in monetarist models, with inconclusive results. To resolve this ambiguity, we invoke the institutional features of the national banking era. Most of the variation in bank loans is accounted for by loans secured by stock, which in turn reflect volatility in the stock market. When account is taken of the stock market, the influence of credit in the VAR model is greatly reduced, while the influence of money remains robust. The breakdown of the composition of bank loans into stock market loans (traded in open asset markets) and other business loans (a possible setting for credit rationing) reveals that other business loans remained remarkably stable over the business cycle.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3689.
Date of creation: May 1992
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Publication status: published as Michael D. Bordo, Peter Rappoport, Anna J. Schwartz. "Money versus Credit Rationing: Evidence for the National Banking Era, 1880-1914," in Claudia Goldin and Hugh Rockoff, editors, "Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel" University of Chicago Press (1992)
Note: ME DAE
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- Michael D. Bordo & Peter Rappoport & Anna J. Schwartz, 1992. "Money versus Credit Rationing: Evidence for the National Banking Era, 1880-1914," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 189-223 National Bureau of Economic Research, Inc.
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- Michael D. Bordo & Joseph G. Haubrich, 2009.
"Credit Crises, Money and Contractions: an historical view,"
NBER Working Papers
15389, National Bureau of Economic Research, Inc.
- Bordo, Michael D. & Haubrich, Joseph G., 2010. "Credit crises, money and contractions: An historical view," Journal of Monetary Economics, Elsevier, vol. 57(1), pages 1-18, January.
- Michael D. Bordo & Joseph G. Haubrich, 2009. "Credit crises, money, and contractions: A historical view," Working Paper 0908, Federal Reserve Bank of Cleveland.
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