Harvests and Financial Crises in Gold-Standard America

Abstract

Most American financial crises of the postbellum gold-standard era were caused by fluctuations in the cotton harvest due to exogenous factors such as weather.The transmission channel ran through export revenues and financial markets under the pre-1914 monetary regime.A poor cotton harvest depressed export revenues and reduced international demand for American assets, which depressed American stock prices, drained deposits from money-center banks and precipitated a business-cycle downturn -conditions that bred financial crises.The crises caused by cotton harvests could have been prevented by an American central bank, even under gold-standard constraints.

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