Banking Crises Under a Microscope

29 Pages Posted: 17 Jun 2019 Last revised: 4 Sep 2019

See all articles by Matthew Baron

Matthew Baron

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: August 30, 2019

Abstract

This paper highlights problems with existing narrative chronologies of banking crises and showcases new quantitative approaches for reconstructing and analyzing the global history of banking crises. Using a historical panel of bank equity returns across 46 countries, this paper puts forward two new results demonstrating how banking crises in advanced economies have changed over time. First, I show that, although unlevered bank equity losses are lower for post-1945 crises (relative to pre-1914 crises), bank equity losses are considerably greater, due to higher bank leverage. Second, in the pre-1914 period, bank equity returns are sensitive to trade, commodity, and monetary gold shocks, but much less so to real estate returns and past credit booms—whereas the exact opposite is true in the post-1945 period.

Keywords: historical banking crises

JEL Classification: G01

Suggested Citation

Baron, Matthew, Banking Crises Under a Microscope (August 30, 2019). Available at SSRN: https://ssrn.com/abstract=3399551 or http://dx.doi.org/10.2139/ssrn.3399551

Matthew Baron (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

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