Crises and the Development of Economic Institutions: Some Microeconomic Evidence

8 Pages Posted: 8 Feb 2016

See all articles by Raghuram G. Rajan

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Rodney Ramcharan

University of Southern California, Marshall School of Business

Date Written: February 6, 2016

Abstract

This paper studies the long run effects of financial crises using new bank and town level data from around the Great Depression. We find evidence that banking markets became much more concentrated in areas that experienced a greater initial collapse in the local banking system. There is also evidence that financial regulation after the Great Depression, and in particular limits on bank branching, may have helped to render the effects of the initial collapse persistent. All of this suggests a reason why post-crisis financial regulation, while potentially reducing financial instability, might also have longer run real consequences.

Keywords: financial crises, banking

JEL Classification: G21

Suggested Citation

Rajan, Raghuram G. and Ramcharan, Rodney, Crises and the Development of Economic Institutions: Some Microeconomic Evidence (February 6, 2016). American Economic Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2728740

Raghuram G. Rajan

University of Chicago - Booth School of Business ( email )

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International Monetary Fund (IMF) ( email )

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National Bureau of Economic Research (NBER)

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Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

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HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

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