Article

The Great Depression and Other ‘Contagious’ Events

Charles W. Calomiris

in The Oxford Handbook of Banking

Published in print January 2012 | ISBN: 9780199640935
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199640935.013.0027

Series: Oxford Handbooks in Finance

The Great Depression and Other ‘Contagious’ Events

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This article reviews the theory and historical evidence related to the prevalence of bank failure, panics, and contagion. It argues that banking system panics are neither random events nor inherent to the function of banks or the structure of bank balance sheets, but are caused by temporary confusion about the incidence of shocks within the banking system. Drawing on empirical evidence, it contends that deposit insurance and other policies intended to prevent instability have become the single greatest source of banking instability.

Keywords: bank failure; bank contagion; banking system; deposit insurance; banking regulation; banking instability

Article.  7558 words. 

Subjects: Economics ; Financial Markets ; Economic History

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