Banking Crises Without Panics*
Name
SSRN-id3379894.pdf
Description
Accepted version
Size
453.47 KB
Format
Adobe PDF
Checksum (MD5)
a189db9dcf74b8bfe7d8c27ae39a9452
Author(s)
Baron, Matthew
Verner, Emil
Xiong, Wei
Date Issued
2020
Journal
Quarterly Journal of Economics
Publisher
Oxford University Press (OUP)
Version
Author's final manuscript
Abstract
© 2021 The Author(s) 2021. Published by Oxford University Press on behalf of the President and Fellows of Harvard College. We examine historical banking crises through the lens of bank equity declines, which cover a broad sample of episodes of banking distress with and without banking panics. To do this, we construct a new data set on bank equity returns and narrative information on banking panics for 46 countries over the period of 1870 to 2016. We find that even in the absence of panics, large bank equity declines are associated with substantial credit contractions and output gaps. Although panics are an important amplification mechanism, our results indicate that panics are not necessary for banking crises to have severe economic consequences. Furthermore, panics tend to be preceded by large bank equity declines, suggesting that panics are the result, rather than the cause, of earlier bank losses. We use bank equity returns to uncover a number of forgotten historical banking crises and create a banking crisis chronology that distinguishes between bank equity losses and panics.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
10.1093/QJE/QJAA034
