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The highs and the lows: bank failures in Sweden through inflation and deflation, 1914–1926

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  • Seán Kenny
  • Anders Ögren
  • Liang Zhao

Abstract

This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain ex-ante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.

Suggested Citation

  • Seán Kenny & Anders Ögren & Liang Zhao, 2023. "The highs and the lows: bank failures in Sweden through inflation and deflation, 1914–1926," European Review of Economic History, European Historical Economics Society, vol. 27(2), pages 223-249.
    • Handle: RePEc:oup:ereveh:v:27:y:2023:i:2:p:223-249.
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    File URL: http://hdl.handle.net/10.1093/ereh/head001
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