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Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from a Federal Reserve District Border, 1929-1933


  • Gary Richardson
  • William Troost


The Federal Reserve Act divided Mississippi between the 6th (Atlanta) and 8th (St. Louis) Districts. During the Great Depression, these districts' policies differed. Atlanta championed monetary activism and the extension of aid to ailing banks. St. Louis eschewed expansionary initiatives. During a banking crisis in 1930, Atlanta expedited lending to banks in need. St. Louis did not. Outcomes differed across districts. In Atlanta, banks survived at higher rates, lending continued at higher levels, commerce contracted less, and recovery began earlier. These patterns indicate that central bank intervention influenced bank health, credit availability, and business activity. (c) 2009 by The University of Chicago. All rights reserved.

Suggested Citation

  • Gary Richardson & William Troost, 2009. "Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from a Federal Reserve District Border, 1929-1933," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 1031-1073, December.
  • Handle: RePEc:ucp:jpolec:v:117:y:2009:i:6:p:1031-1073

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    References listed on IDEAS

    1. Wicker,Elmus, 1996. "The Banking Panics of the Great Depression," Cambridge Books, Cambridge University Press, number 9780521562614, March.
    2. Cecchetti, Stephen G & Karras, Georgios, 1994. "Sources of Output Fluctuations during the Interwar Period: Further Evidence on the Causes of the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 80-102, February.
    3. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
    4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    5. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    6. Rosenbloom, Joshua L. & Sundstrom, William A., 1999. "The Sources of Regional Variation in the Severity of the Great Depression: Evidence from U.S. Manufacturing, 1919–1937," The Journal of Economic History, Cambridge University Press, vol. 59(03), pages 714-747, September.
    7. Gary Richardson & William Troost, 2006. "Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933," NBER Working Papers 12591, National Bureau of Economic Research, Inc.
    8. Charles W. Calomiris & Joseph R. Mason, 2003. "Fundamentals, Panics, and Bank Distress During the Depression," American Economic Review, American Economic Association, vol. 93(5), pages 1615-1647, December.
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