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The German Twin Crisis of 1931

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  • SCHNABEL, ISABEL

Abstract

Using information on banks' balance sheets, I analyze the causal links between the banking and currency problems in the German crisis of 1931. I find that the crisis had two independent causes: Political shocks triggered a run on the Reichsmark; and the excessive risk-taking by banks that were “too big to fail†led to a run on banks. Due to the high level 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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  • Schnabel, Isabel, 2004. "The German Twin Crisis of 1931," The Journal of Economic History, Cambridge University Press, vol. 64(3), pages 822-871, September.
    • Handle: RePEc:cup:jechis:v:64:y:2004:i:03:p:822-871_00
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