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How the Bank of France Changed U.S. Equity Expectations and Ended the Panic of 1907

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  • Rodgers, Mary Tone
  • Payne, James E.

Abstract

Using an event study approach, we find the announcement by the Bank of France in 1907 to accelerate gold payments directly for U.S. crops is associated with the ultimate upturn in U.S. equity prices. Spillover to the French financial markets accompanied the Regents’ decision to release sterilized reserves, thereby arresting the drainage of coin in French circulation. Counterfactual analysis shows that the facility alone would have been unlikely to end the crisis. Investors may have revised equity expectations upward, recognizing that the acceleration in reliable seasonal gold flows would relieve monetary stringency.

Suggested Citation

  • Rodgers, Mary Tone & Payne, James E., 2014. "How the Bank of France Changed U.S. Equity Expectations and Ended the Panic of 1907," The Journal of Economic History, Cambridge University Press, vol. 74(2), pages 420-448, June.
    • Handle: RePEc:cup:jechis:v:74:y:2014:i:02:p:420-448_00
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    Cited by:

    1. Rockoff, Hugh, 2015. "O.M.W. Sprague (the man who “wrote the book” on financial crises) and the founding of the Federal Reserve," Journal of Financial Stability, Elsevier, vol. 17(C), pages 35-45.
    2. Gary Gorton & Ellis W. Tallman, 2016. "How Did Pre-Fed Banking Panics End?," NBER Working Papers 22036, National Bureau of Economic Research, Inc.
    3. Bazot, Guillaume & Bordo, Michael D. & Monnet, Eric, 2016. "International shocks and the balance sheet of the Bank of France under the classical gold standard," Explorations in Economic History, Elsevier, vol. 62(C), pages 87-107.
    4. Rockoff, Hugh, 2022. "Milton Friedman on bailouts," Journal of Financial Stability, Elsevier, vol. 63(C).
    5. Frederic S. Mishkin & Eugene N. White, 2014. "Unprecedented Actions: The Federal Reserve’s Response to the Global Financial Crisis in Historical Perspective," NBER Working Papers 20737, National Bureau of Economic Research, Inc.
    6. Mary T. Rodgers & James E. Payne, 2020. "Post‐financial crisis changes in financial system structure: An examination of the J.P. Morgan & Co. Syndicates after the 1907 Panic," Review of Financial Economics, John Wiley & Sons, vol. 38(S1), pages 226-241, March.

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