Fundamentals, Panics, and Bank Distress During the DepressionCoauthor(s): Joseph Mason.
We assemble bank-level and other data for Fed member banks to model determinants of bank failure. Fundamentals explain bank failure risk well. The first two Friedman-Schwartz crises are not associated with positive unexplained residual failure risk, or increased importance of bank illiquidity for forecasting failure. The third Friedman-Schwartz crisis is more ambiguous, but increased residual failure risk is small in the aggregate. The final crisis (early 1933) saw a large unexplained increase in bank failure risk. Local contagion and illiquidity may have played a role in pre-1933 bank failures, even though those effects were not large in their aggregate impact.
The American Economic Review © 2003
Source: American Economic Review
Calomiris, Charles, and Joseph Mason. "Fundamentals, Panics, and Bank Distress During the Depression." American Economic Review 93, no. 5 (December 2003): 1615-1647.
Date: 12 2003