The Real Effects of Bank Runs. Evidence from the French Great Depression (1930-1931)

66 Pages Posted: 24 May 2021

See all articles by Eric Monnet

Eric Monnet

Paris School of Economics (PSE)

Angelo Riva

European Business School Paris

Stefano Ungaro

Banque de France; French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR)

Date Written: April 1, 2021

Abstract

We investigate the causal impact of bank runs by exploiting a key feature of the French Great Depression (1930-1931) that created exogenous geographical variations in the withdrawals of bank deposits. Unregulated commercial banks coexisted with government-backed saving institutions (Caisses d’épargne). During the crisis, depositors who had an account in Caisses d’épargne were more likely to withdraw from banks. Pre-crisis density of Caisses d’épargne accounts was unrelated to economic and bank characteristics. Using this variable as an instrument, we find that a 1% decrease in bank branches reduced aggregate income by 1%. Our identification highlights how a shift of deposits towards safer institutions can affect financial fragility. It holds lessons for current financial regulation and the design of central bank digital currency (CBDC).

JEL Classification: E44, E51, G01, G21, N14, N24

Suggested Citation

Monnet, Eric and Riva, Angelo and Ungaro, Stefano, The Real Effects of Bank Runs. Evidence from the French Great Depression (1930-1931) (April 1, 2021). CEPR Discussion Paper No. DP16054, Available at SSRN: https://ssrn.com/abstract=3846142

Eric Monnet (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Angelo Riva

European Business School Paris ( email )

37/39 Boulevard Murat
Paris, 75016
France

Stefano Ungaro

Banque de France ( email )

Paris
France

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR) ( email )

Paris
France

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