We employ a unique hand-collected dataset and a novel methodology to examine systemic risk before and after the largest U.S. banking crisis of the 20th century. Our systemic risk measure captures both the credit risk of an individual bank as well as a bank's position in the network. We construct...

Over the four years beginning in the summer of 1929, financial markets, labor markets and goods markets all virtually ceased to function. Throughout this, the government policymaking apparatus seemed helpless. Since the end of the Great Depression, macroeconomists have labored diligently in an...

We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, which allows them to provide loans for profitable firms during a crisis. Due to the services they provide, operating costs...

In response to the Financial Crisis of 2008, macroeconomic policymakers employed a range of tools designed to prevent failures of large, complex financial institutions ("banks"). The Treasury and the Fed justified these actions by arguing that bank failures exacerbate output declines, rather...

We examine the evolution of real per capita GDP around 100 systemic banking crises. Part of the costs of these crises owes to the protracted nature of recovery. On average, it takes about eight years to reach the pre-crisis level of income; the median is about 6 1⁄2 years. Five to six years...

The quality of the money stock declined during the banking crises of the early 1930s. Bank deposits did not serve as a secure short- term store of purchasing power for use in an emergency as well as they had previously, and during the periods of restricted deposits in late 1932 and early 1933,...

Do stock markets act as a “spare tire” during banking crises, providing an alternative corporate financing channel and mitigating the economic severity of banking crises? Using firm-level data in 36 countries from 1990 through 2011, we find that the adverse consequences of banking crises on...

In a model with multiple Pareto-ranked equilibria we add trade in assets that pay based on the realization of a sunspot. Asset trading restricts the equilibrium set in a way that raises welfare by eliminating equilibria with a high likelihood of disasters. When the probability of a disaster is...

We analyze a financial collapse, such as the one which occurred during the Great Depression, from the perspective of a monetary model with multiple equilibria. The economy we consider contains financial fragility due to increasing returns to scale in the intermediation process. Intermediaries...

This paper explores the behavior of the U.S. economy during the interwar period from the perspective of a model in which the existence of non-convexities in the intermediation process gives rise to a multiplicity of equilibria. The resulting indeterminancy is resolved through a sunspot process...