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

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  • Gary Richardson
  • William Troost

Abstract

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
    DOI: 10.1086/649603
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    References listed on IDEAS

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