Working Paper: NBER ID: w12591
Authors: Gary Richardson; William Troost
Abstract: The Federal Reserve Act of 1913 divided Mississippi between the 6th (Atlanta) and 8th (St. Louis) Federal Reserve Districts. Before and during the Great Depression, these districts' policies differed. The Atlanta Fed championed monetary activism and the extension of credit to troubled banks. The St. Louis Fed adhered to the doctrine of real bills and eschewed expansionary initiatives. Outcomes differed across districts. In the 6th District, banks failed at lower rates than in the 8th District, particularly during the banking panic in the fall of 1930. The pattern suggests that discount lending reduced failure rates during periods of panic. Historical evidence and statistical analysis corroborates this conclusion.
Keywords: Banking Panics; Federal Reserve; Great Depression; Quasi-Experimental Evidence
JEL Codes: E5; E6; N1; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| If other federal reserve banks adopted similar strategies as Atlanta Fed (E58) | Fewer banks would have failed (G28) |
| Federal Reserve policies (E52) | Bank failure rates (G21) |
| Atlanta Fed's monetary intervention (E52) | Bank failure rates (G21) |
| Provision of liquidity (G33) | Bank survival (G21) |
| Bank survival (G21) | Bank suspensions and liquidations (G33) |