The German Twin Crisis of 1931

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The German Twin Crisis of 1931

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Schnabel, Isabel () (Sonderforschungsbereich 504)

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Abstract

Using information on banks' balance sheets, we analyze the causal links between the banking and the currency problems in the German financial crisis of 1931. We find that the currency problems were caused by political shocks, while the problems in the banking sector were the result of excessive risk-taking by banks that were 'too big to fail'. Due to the high levels of foreign debt in the banking system, the run on the currency and the deposit withdrawals reinforced each other in a vicious circle and resulted in a banking panic and the abandonment of the gold standard.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 02-48.

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Length: 39 pages
Date of creation: 11 Sep 2002
Date of revision:
Handle: RePEc:xrs:sfbmaa:02-48

Note: An earlier version of this paper circulated under my former surname Gödde. I would like to thank Martin Hellwig for his encouragement and advice. I also thank Michael Bordo, Christoph Buchheim, Timothy Guinnane, Gerd Hardach, Martin Summer, Peter Temin, seminar participants at the University of Mannheim, the International Monetary Fund, Deutsche Bundesbank, and Oesterreichische Nationalbank, and conference participants at the Verein für Socialpolitik for helpful comments and suggestions.
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Article
- Schnabel, Isabel, 2004. "The German Twin Crisis of 1931," The Journal of Economic History, Cambridge University Press, vol. 64(03), pages 822-871, September. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-10-08 (All new papers)
NEP-IFN-2002-10-08 (International Finance)

Cited by:
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Wolf, Nikolaus, 2008. "Scylla and Charybdis. Explaining Europe’s Exit from Gold, January 1928- December 1936," CEPR Discussion Papers 6685, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Nikolaus Wolf, 2008. "Scylla and Charybdis. Explaining Europe’s Exit from Gold, January 1928 – December 1936," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Wolf, Nikolaus, 2008. "Scylla and Charybdis. Explaining Europe's exit from gold, January 1928-December 1936," Explorations in Economic History, Elsevier, vol. 45(4), pages 383-401, September. [Downloadable!] (restricted)
Hakenes, Hendrik & Schnabel, Isabel, 2004. "Banks without Parachutes -- Competitive Effects of Government Bail-out Policies," Sonderforschungsbereich 504 Publications 04-53, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
Other versions:
- Hendrik Hakenes & Isabel Schnabel, 2004. "Banks without Parachutes – Competitive Effects of Government Bail-out Policies," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_12, Max Planck Institute for Research on Collective Goods. [Downloadable!]
- Hendrik Hakenes & Isabel Schnabel, 2004. "Banks without Parachutes - Competitive Effects of Government Bail-out Policies," Discussion Papers 8, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]

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