The Macroeconomic Effects of Banking Crises: Evidence from the United Kingdom, 1750–1938

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Abstract

This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.
Original languageEnglish
Number of pages18
JournalExplorations in Economic History
Volume79
Issue numberJanuary
Early online date2020
DOIs
Publication statusPublished - 2021 Jan 1

Subject classification (UKÄ)

  • Economic History

Keywords

  • banking crisis
  • macroeconomy
  • narrative identification
  • vector autoregression
  • United Kingdom

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