The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938

https://doi.org/10.1016/j.eeh.2020.101357Get rights and content
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Abstract

This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.

JEL

E32
E44
G21
N13
N14
N23
N24

Keywords

Banking crisis
Macroeconomy
Narrative identification
Vector autoregression
United Kingdom

Cited by (0)

For help and comments, we thank Anders Ögren, Christopher Meissner, Dmitry Kuvshinov, Fredrik NG Andersson, Gareth Campbell, Jonas Ljungberg, Kerstin Enflo, Klas Fregert, Marco Molteni, Mats Larsson, Robin Adams, Rui Esteves and participants at the European Macrohistory Workshop at the University of York. We are grateful for funding from the Handelsbanken Jan Wallander and Tom Hedelius Foundation (project numbers P16-0150:1 and W18-0007).