Monetary Intervention Mitigated Banking Panics During the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933

Gary Richardson · William Troost

69 citations0/0 files storedNational Bureau of Economic Research

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Banking stability, regulation, efficiency Monetary Policy and Economic Impact Historical Economic and Social Studies

Abstract

The Federal Reserve Act of 1913 divided Mississippi between the 6th (Atlanta) and 8th (St.Louis) Federal Reserve Districts.Before and during the Great Depression, these districts' policies differed.The Atlanta Fed championed monetary activism and the extension of credit to troubled banks.The St. Louis Fed adhered to the doctrine of real bills and eschewed expansionary initiatives.Outcomes differed across districts.In the 6th District, banks failed at lower rates than in the 8th District, particularly during the banking panic in the fall of 1930.The pattern suggests that discount lending reduced failure rates during periods of panic.Historical evidence and statistical analysis corroborates this conclusion.

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References

2017A Monetary History of the United States, 1867-1960 1983Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression 1873Lombard Street: A Description of the Money Market 1964A Monetary History of the United States, 1867-1960 2024Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression 1966A Monetary History of the United States 1867-1960.1989Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz 1988Distinguishing Panics and Information-based Bank Runs: Welfare and Policy Implications

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2007The Check is in the Mail: Correspondent Clearing and the Collapse of the Banking System, 1930 to 1933 2016Network Contagion and Interbank Amplification during the Great Depression 2014Central bank liquidity provision and collateral quality 2018Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System 2014Monetary Intervention Really Did Mitigate Banking Panics During the Great Depression: Evidence Along the Atlanta Federal Reserve District Border

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