Working Paper: NBER ID: w31088
Authors: Matthew S. Jaremski; Gary Richardson; Angela Vossmeyer
Abstract: A nationwide panic forced President Franklin Roosevelt to declare a banking holiday in March 1933. The government reopened banks sequentially using a process that sent noisy signals about banks’ health. New microdata reveals the public responded to these signals. Deposits at rapidly reopened banks grew quicker than deposits at comparable or stronger banks that reopened even a few days or weeks later. The stigma of late reopening lasted for a decade. This stigma shifted funds from stigmatized to lauded banks and among communities that they served, but the shift in funds across institutions and communities had no measurable impact on the rate at which localities recovered from the Great Depression.
Keywords: banking interventions; bank holiday; Great Depression; bank stigma; deposit flows
JEL Codes: E5; G21; N22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reopening dates influenced by public and private information (G14) | misinterpretations of bank health (G21) |
| stronger signals (L96) | stronger responses from depositors (G21) |
| reopening date (Y20) | depositor behavior (D14) |
| reopening date (Y20) | deposit flows (G21) |
| deposit flows (G21) | economic recovery (E65) |