Abstract: There are two competing theories explaining bank panics. One argues
that panics are driven by real shocks, asymmetric information, and
concerns about insolvency. The other theory argues that bank runs are
self-fulfilling, driven by illiquidity and the beliefs of depositors.
This paper tests predictions of these two theories using information
uniquely available for the Crisis of 1893. The results suggest that
real economic shocks were important determinants of the location of
panics at the national level, however at the local level, both
insolvency and illiquidity were important as triggers of bank panics.
Keywords: Bank runs, bank suspensions, Panic of 1893
Full paper (123 KB PDF)
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Last update: February 11, 2002
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