International Banking and Transmission of the 1931 Financial Crisis

61 Pages Posted: 29 Nov 2016

See all articles by Olivier Accominotti

Olivier Accominotti

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

In May-July 1931, a series of financial panics shook Central Europe before spreading to the rest of the world. This paper explores how the 1931 Central European crisis propagated to the London and New York financial centers; it also examines the role of cross-border banking linkages in international crisis transmission. Using archival bank-level data, I document US and British banks' asset-side exposure to the crisis region. The Continental crisis disturbed few US banks but endangered several British financial institutions and triggered severe stress in the London money market. Central European credits were mostly held by large and diversified commercial banks in the United States and by small and geographically specialized financial institutions in Britain. Differences in the market structure of the trade finance industry explain why the 1931 Central European crisis infected London banks but not New York banks.

Keywords: International Contagion; Cross-Border Banking; Trade Finance; 1931 Crisis

JEL Classification: F34, G21, N22, N24

Suggested Citation

Accominotti, Olivier, International Banking and Transmission of the 1931 Financial Crisis (November 2016). CEPR Discussion Paper No. DP11651. Available at SSRN: https://ssrn.com/abstract=2877255

Olivier Accominotti (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Economic History Department
Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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