The Effect of Cash Injections: Evidence from the 1980s Farm Debt Crisis

48 Pages Posted: 16 May 2017

See all articles by Nittai Bergman

Nittai Bergman

Tel Aviv University; National Bureau of Economic Research (NBER)

Rajkamal Iyer

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Richard T. Thakor

University of Minnesota - Carlson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 15, 2017

Abstract

What is the effect of cash injections during financial crises? Exploiting county-level variation arising from random weather shocks during the 1980s Farm Debt Crisis, we analyze and measure the effect of local cash flow shocks on the real and financial sector. We show that such cash flow shocks have significant impact on a host of economic outcomes, including land values, loan delinquency rates, the probability of bank failure, employment, and wages. Estimates of the effect of local cash flow shocks on county income levels during the financial crisis yield a multiplier of 1.63.

Keywords: Financial Crises, Financial Accelerator, Cash-in-the-Market Pricing, Fiscal Multiplier

JEL Classification: D22, D24, D31, E23, E24, E51, G01, G21

Suggested Citation

Bergman, Nittai and Iyer, Rajkamal and Thakor, Richard T., The Effect of Cash Injections: Evidence from the 1980s Farm Debt Crisis (May 15, 2017). Available at SSRN: https://ssrn.com/abstract=2968458 or http://dx.doi.org/10.2139/ssrn.2968458

Nittai Bergman

Tel Aviv University

Ramat Aviv
Tel-Aviv, 6997801
Israel

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rajkamal Iyer

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Richard T. Thakor (Contact Author)

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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