Who Panics During Panics? Evidence from a Nineteenth Century Savings Bank

47 Pages Posted: 28 Mar 2002 Last revised: 27 Oct 2010

See all articles by Cormac O'Grada

Cormac O'Grada

University College Dublin (UCD)

Eugene N. White

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2002

Abstract

Using records of the bank accounts of individual depositors, this paper provides a detailed microeconomic analysis of two nineteenth century banking panics. The panics of 1854 and 1857 were not characterized by an immediate mass panic of depositors and had important time dimensions. We examine depositor behavior using a hazard model. Contagion was the key factor in 1854 but it was not strong enough to create more than a local panic. In contrast, the panic of 1857 began with runs by businessmen and banking sophisticates followed by less informed depositors. Uninformed contagion may have been present, but the evidence suggests that this panic was driven by informational shocks in the face of asymmetric information about the true condition of bank portfolios.

Suggested Citation

O'Grada, Cormac and White, Eugene Nelson, Who Panics During Panics? Evidence from a Nineteenth Century Savings Bank (March 2002). NBER Working Paper No. w8856, Available at SSRN: https://ssrn.com/abstract=305600

Cormac O'Grada

University College Dublin (UCD) ( email )

Dublin 4, 4
Ireland

Eugene Nelson White (Contact Author)

Rutgers University - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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