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Network Contagion and Interbank Amplification during the Great Depression

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  • Mitchener, Kris
  • Richardson, Gary

Abstract

Interbank networks amplified the contraction in lending during the Great Depression. Banking panics induced banks in the hinterland to withdraw interbank deposits from Federal Reserve member banks located in reserve and central reserve cities. These correspondent banks responded by curtailing lending to businesses. Between the peak in the summer of 1929 and the banking holiday in the winter of 1933, interbank amplification reduced aggregate lending in the U.S. economy by an estimated 15 percent.

Suggested Citation

  • Mitchener, Kris & Richardson, Gary, 2016. "Network Contagion and Interbank Amplification during the Great Depression," CEPR Discussion Papers 11164, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11164
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    More about this item

    Keywords

    Bank networks; Great depression; Banking panics; Contagion; Interbank market;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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