Working Paper: NBER ID: w27703
Authors: Eric Hilt; Matthew S. Jaremski; Wendy Rahn
Abstract: We study the effects of the liberty bond drives of World War I on financial intermediation in the 1920s and beyond. Using panel data on U.S. counties, and an instrument that captures differences in the approaches used to market the bonds, we find that higher liberty bond subscription rates led to an increase in investment banks and a contraction in commercial bank assets. We also find that in the late 1930s, individuals residing in states where liberty bond subscription rates had been higher were more likely to report owning stocks or bonds. Although they were conducted to support the American effort in World War I, the liberty loan drives reshaped American finance.
Keywords: Liberty Bonds; Financial Intermediation; Investment Banks; Commercial Banks
JEL Codes: N12; N22; N42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liberty bond subscription rates (G12) | number of investment banks (G24) |
| liberty bond subscription rates (G12) | commercial bank assets (G21) |
| liberty bond subscription rates (G12) | financial asset ownership (G32) |