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Banking panics, bank failures, and the lender of last resort: the Showa Depression of 1930--1932

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  • Fumio Akiyoshi

Abstract

By using bank-level data pertaining to the period of the Showa Depression in Japan, we examine whether banking panics caused solvent banks to close down and fail. We find that bank fundamentals were weakly related to the failures during the panics. This result implies that the confusion on the part of depositors regarding bank asset quality was not negligible during the panics. Further, we find that during the panics, the Bank of Japan (BoJ) selectively provided liquidity assistance to solvent banks that suffered heavy withdrawals. The BoJ as a lender of last resort prevented the closures of these solvent banks and mitigated the potential problems of the panics. Copyright 2009 Oxford University Press 2009 All rights reserved, Oxford University Press.

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  • Fumio Akiyoshi, 2009. "Banking panics, bank failures, and the lender of last resort: the Showa Depression of 1930--1932," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 776-800, October.
    • Handle: RePEc:oup:oxecpp:v:61:y:2009:i:4:p:776-800
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    File URL: http://hdl.handle.net/10.1093/oep/gpp016
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    Cited by:

    1. Larry D. Wall, 2012. "Central banking for financial stability Some lessons from the recent instability in the US and euro area," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 8(3), pages 247-280, August.
    2. Masami Imai & Tetsuji Okazaki & Michiru Sawada, 2022. "The effects of lender of last resort on financial intermediation during the great depression in Japan [Ginko Hatan gaoyobosu Densenkoka no Bunseki (The analyses of the effect of contagion caused by," European Review of Economic History, European Historical Economics Society, vol. 26(3), pages 448-478.
    3. Wall, Larry D., 2012. "Central Banking for Financial Stability: Some Lessons from the Recent Instability in the United States and Euro Area," ADBI Working Papers 379, Asian Development Bank Institute.

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