Crisis?: What crisis?: currency vs. banking in the financial crisis of 1931

Ritschl, Albrecht and Salferaz, Samad (2010) Crisis?: What crisis?: currency vs. banking in the financial crisis of 1931. CEP Discussion Paper (977). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

This paper examines the role of currency and banking in the German financial crisis of 1931 for both Germany and the U.S. We specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies. We find that monetary transmission through the Gold Standard played only a minor role in causing and propagating the crisis, while financial distress was important. We also find evidence of crisis propagation from Germany to the U.S. via the banking channel. Banking distress in both economies was apparently not endogenous to monetary policy. Results confirm Bernanke's (1983) conjecture that an independent, non-monetary financial channel of crisis propagation was operative in the Great Depression.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2010 The authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N12 - U.S.; Canada: 1913- C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Other Model Applications N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N13 - Europe: Pre-1913 E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E47 - Forecasting and Simulation
Date Deposited:	22 Jul 2010 14:05
Last Modified:	15 Sep 2023 23:19
URI:	http://eprints.lse.ac.uk/id/eprint/28726

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