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The limits to lender of last resort interventions in emerging economies: evidence from the Gold Standard and the Great Depression in Spain

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  • Enrique Jorge-Sotelo

Abstract

Conventional accounts argue that Spain escaped the Great Depression because its currency was not convertible to gold. Accordingly, when a bank run ensued in 1931, the Banco de España would have been able to lend freely as lender of last resort. Drawing on new archival data on bank balance sheets and discount window borrowing, I show that rapid currency depreciation caused by the reversal in international capital flows that started in 1928 bounded monetary authorities to a dilemma between liquidity assistance and capital mobility during the 1931 crisis. These limits to policy reaction help explain the sharp contraction in bank lending and economic activity during and after 1931.

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  • Enrique Jorge-Sotelo, 2020. "The limits to lender of last resort interventions in emerging economies: evidence from the Gold Standard and the Great Depression in Spain," European Review of Economic History, European Historical Economics Society, vol. 24(1), pages 98-133.
    • Handle: RePEc:oup:ereveh:v:24:y:2020:i:1:p:98-133.
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    File URL: http://hdl.handle.net/10.1093/ereh/hey030
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    Cited by:

    1. Jorge-Sotelo, Enrique, 2022. "Politicians, bankers and the Great Depression: The Spanish banking crisis of 1931," eabh Papers 22-01, The European Association for Banking and Financial History (EABH).
    2. Damian Clarke & Manuel Llorca Jaña & Daniel Pailañir, 2023. "The use of quantile methods in economic history," Historical Methods: A Journal of Quantitative and Interdisciplinary History, Taylor & Francis Journals, vol. 56(2), pages 115-132, April.
    3. Dario Pellegrino & Marco Molteni, 2021. "Lessons from the Early Establishment of Banking Supervision in Italy (1926-1936)," Quaderni di storia economica (Economic History Working Papers) 48, Bank of Italy, Economic Research and International Relations Area.
    4. Monnet, Eric & Degorce, Victor, 2020. "The Great Depression as a Saving Glut," CEPR Discussion Papers 15287, C.E.P.R. Discussion Papers.

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