Micro-Evidence From a System-Wide Financial Meltdown: The German Crisis of 1931

43 Pages Posted: 15 Aug 2019 Last revised: 1 Oct 2019

See all articles by Kristian Blickle

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York

Markus K. Brunnermeier

Princeton University - Department of Economics

Stephan Luck

Federal Reserve Bank of New York

Date Written: August 12, 2019

Abstract

In this paper, we use hand-collected monthly bank balance sheet data during a system-wide run on the German banking system in 1931 to study the determinants of bank stability. We derive three key insights. First, demand deposits are — despite the absence of deposit insurance — largely stable and the run is centered around the collapse of interbank and wholesale funding. Second, while aggregate deposits are contracting, deposits are also partially reshuffled within the system with some banks receiving deposit inflows during the run. Third, we show that both, better capitalized and more liquid banks, are more stable and less likely to be subject to deposit outflows during the run. However, only higher bank capital is associated with higher credit provision in the crisis.

Keywords: bank runs, financial crisis, banking panics, banking regulation

JEL Classification: G01, G21, N20, N24

Suggested Citation

Blickle, Kristian and Brunnermeier, Markus Konrad and Luck, Stephan, Micro-Evidence From a System-Wide Financial Meltdown: The German Crisis of 1931 (August 12, 2019). Available at SSRN: https://ssrn.com/abstract=3436140 or http://dx.doi.org/10.2139/ssrn.3436140

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Markus Konrad Brunnermeier

Princeton University - Department of Economics ( email )

Bendheim Center for Finance
Princeton, NJ
United States
609-258-4050 (Phone)
609-258-0771 (Fax)

HOME PAGE: http://www.princeton.edu/¡­markus

Stephan Luck (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
74
Abstract Views
568
rank
328,745
PlumX Metrics