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Government-made bank distress: Industrialisation policies and the Russian financial crisis of 1899-1902

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  • Lychakov, Nikita

Abstract

How can industrial policies lead to bank distress? In the 1890s, when undergoing rapid state-led industrialisation, the Russian Empire grew by foreign capital inflows into national debt and by state procurement of industrial output. Concurrently, state policies incentivised, but did not compel, commercial banks to finance industry. In 1899, the inflow of foreign capital fell sharply, initiating a financial crisis. Using newly-collected historical data and extensive narrative evidence, I find the banks which experienced greater distress in the crisis had more personal connections to the government officials who were close to the epicentre of policymaking. Moreover, these banks had more personal ties to the companies which had been most-stimulated by state policies to expand production. Taken together, these two findings suggest that national development policies had a destabilising impact on bank performance.

Suggested Citation

  • Lychakov, Nikita, 2018. "Government-made bank distress: Industrialisation policies and the Russian financial crisis of 1899-1902," QUCEH Working Paper Series 2018-11, Queen's University Belfast, Queen's University Centre for Economic History.
  • Handle: RePEc:zbw:qucehw:201811
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    More about this item

    Keywords

    financial crises; bank failures; development policies; political economy; Russia;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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