Working Paper: NBER ID: w13597
Authors: Charles W. Calomiris
Abstract: Bank failures during banking crises, in theory, can result either from unwarranted depositor withdrawals during events characterized by contagion or panic, or as the result of fundamental bank insolvency. Various views of contagion are described and compared to historical evidence from banking crises, with special emphasis on the U.S. experience during and prior to the Great Depression. Panics or "contagion" played a small role in bank failure, during or before the Great Depression-era distress. Ironically, the government safety net, which was designed to forestall the (overestimated) risks of contagion, seems to have become the primary source of systemic instability in banking in the current era.
Keywords: No keywords provided
JEL Codes: E5; G2; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unwarranted depositor withdrawals (G28) | bank failures (G21) |
| fundamental economic shocks (E32) | bank distress (G21) |
| bank distress (G21) | bank failures (G21) |
| panic (H12) | unwarranted depositor withdrawals (G28) |
| observable economic shocks (E39) | bank failures (G21) |