Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve
American Economic Review
vol. 106,
no. 5, May 2016
(pp. 533-37)
Abstract
This paper examines the impact of the Federal Reserve's founding on seasonal pressures and contagion risk in the interbank system. Deposit flows among classes of banks were highly seasonal before 1914; amplitude and timing varied regionally. Panics interrupted normal flows as banks throughout the country sought funds from the central money markets simultaneously. Seasonal pressures and contagion risk in the system were lower by the 1920s, when the Fed provided seasonal liquidity and reserves. Panics returned in the 1930s, due in part to shocks from nonmember banks and because the Fed's decentralized structure hampered a vigorous response to national crises.Citation
Carlson, Mark, and David C. Wheelock. 2016. "Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve." American Economic Review, 106 (5): 533-37. DOI: 10.1257/aer.p20161044Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E58 Central Banks and Their Policies
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- N22 Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-