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The Great Depression as a Savings Glut

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  • Degorce, Victor
  • Monnet, Eric

Abstract

New data covering 23 countries reveal that banking crises of the Great Depression coincided with a sharp international increase in deposits at savings institutions and life insurance. Deposits fled from commercial banks to alternative forms of savings. This fueled a credit crunch since other institutions did not replace bank lending. While asset prices fell, savings held in savings institutions and life insurance companies increased as a share of GDP and in real terms. These findings provide new explanations for the fall in credit and aggregate demand in the 1930s. They illustrate the need to consider nonbank financial institutions when studying banking crises.

Suggested Citation

  • Degorce, Victor & Monnet, Eric, 2024. "The Great Depression as a Savings Glut," The Journal of Economic History, Cambridge University Press, vol. 84(3), pages 874-916, September.
    • Handle: RePEc:cup:jechis:v:84:y:2024:i:3:p:874-916_7
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    Cited by:

    1. Monnet, Eric & Velde, François R., 2020. "Money, Banking, and Old-School Historical Economics," CEPR Discussion Papers 15348, C.E.P.R. Discussion Papers.
    2. Marodin, Fabrizio Almeida & Mitchener, Kris James & Richardson, Gary, 2024. "Contagion of fear: Panics, money, and the Great Depression," Explorations in Economic History, Elsevier, vol. 93(C).
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    4. Bing Han & David Hirshleifer & Johan Walden, 2023. "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving," Journal of Finance, American Finance Association, vol. 78(3), pages 1647-1704, June.
    5. Arjen van der Heide & Sebastian Kohl, 2024. "Private Insurance, Public Welfare, and Financial Markets: Alpine and Maritime Countries in Comparative-Historical Perspective," Politics & Society, , vol. 52(2), pages 268-303, June.

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    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N2 - Economic History - - Financial Markets and Institutions

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