Working Paper: NBER ID: w8856
Authors: Cormac Grada; Eugene N. White
Abstract: Using records of the bank accounts of individual depositors, this paper provides a detailed microeconomic analysis of two nineteenth century banking panics. The panics of 1854 and 1857 were not characterized by an immediate mass panic of depositors and had important time dimensions. We examine depositor behavior using a hazard model. Contagion was the key factor in 1854 but it was not strong enough to create more than a local panic. In contrast, the panic of 1857 began with runs by businessmen and banking sophisticates followed by less informed depositors. Uninformed contagion may have been present, but the evidence suggests that this panic was driven by informational shocks in the face of asymmetric information about the true condition of bank portfolios.
Keywords: No keywords provided
JEL Codes: N2; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| contagion (F65) | withdrawals at the EISB (F33) |
| bank's insolvency (G33) | withdrawals at the EISB (F33) |
| less wealthy and less informed depositors (G21) | withdrawals during panic of 1854 (N21) |
| informed depositors (G21) | withdrawals during panic of 1857 (N21) |
| negative information about bank asset values (G21) | withdrawals by informed depositors (G21) |
| withdrawals by informed depositors (G21) | withdrawals by less informed depositors (G21) |
| asymmetric information among depositors (D82) | severity of the panic (H12) |