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The Macroeconomic Effects of Banking Crises: Evidence from the United Kingdom, 1750-1938

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  • Jason Lennard
  • Seán Kenny
  • John D. Turner

Abstract

This paper investigates the macroeconomic effects of UK banking crises over the period 1750 to 1938. We construct a new annual banking crisis series using bank failure rate data, which suggests that the incidence of banking crises was every 30 or so years. Using our new series and a narrative approach to identify exogenous banking crises, we find that industrial production contracts by 8.2 per cent in the year following a crisis. This finding is robust to a battery of checks, including different VAR specifications, different thresholds for the crisis indicator, and the use of a capital-weighted bank failure rate.

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  • Jason Lennard & Seán Kenny & John D. Turner, 2017. "The Macroeconomic Effects of Banking Crises: Evidence from the United Kingdom, 1750-1938," National Institute of Economic and Social Research (NIESR) Discussion Papers 478, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:478
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    Cited by:

    1. Jason Lennard, 2020. "Uncertainty and the Great Slump," Economic History Review, Economic History Society, vol. 73(3), pages 844-867, August.
    2. Kenny, Sean & Ögren, Anders & Zhao, Liang, 2023. "The highs and the lows: Bank failures in Sweden through inflation and deflation, 1914-1926," QUCEH Working Paper Series 2023-03, Queen's University Belfast, Queen's University Centre for Economic History.
    3. Kenny, Seán & Turner, John D., 2018. "Wildcat Bankers or Political Failure? The Irish Financial Pantomime, 1797-1826," Lund Papers in Economic History 176, Lund University, Department of Economic History.
    4. Kenny, Seán & Lennard, Jason & Turner, John D., 2021. "The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938," Explorations in Economic History, Elsevier, vol. 79(C).
    5. Braggion, Fabio & Dwarkasing, Narly & Moore, Lyndon, 2022. "Value creating mergers: British bank consolidation, 1885–1925," Explorations in Economic History, Elsevier, vol. 83(C).
    6. Kenny, Seán & Turner, John D., 2018. "Wildcat bankers or political failure? The Irish financial pantomime, 1797-1826," QUCEH Working Paper Series 2018-07, Queen's University Belfast, Queen's University Centre for Economic History.

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    More about this item

    Keywords

    banking crisis; bank failures; narrative approach; macroeconomy; United Kingdom;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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