Wicksell on the American Crisis of 1907
Universidade de Brasilia
December 30, 2009
Journal of the History of Economic Thought, Vol. 33.2, 2011
The paper brings to light an article by Knut Wicksell published in Swedish in 1908 about the American crisis of 1907. Wicksell explicitly distinguished, apparently for the first time in the literature, three features of a healthy banking system: Solvency, liquidity, and versatility. The paper compares Wicksell's account of the 1907 crisis to the contemporary literature (Sprague, Fisher etc) and to Bagehot's classic approach to the working of the banking system in periods of instability. Wicksell emphasized the interaction between insolvency and illiquidity, and pointed out the key role of "versatility" in the form of macroeconomic stabilization policy.
Number of Pages in PDF File: 26
Keywords: 1907 American crisis, Knut Wicksell, solvency, liquidity, versatility
JEL Classification: B13, B31, N11, N21working papers series
Date posted: December 30, 2009 ; Last revised: September 23, 2010
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