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Arresting Banking Panics: Federal Reserve Liquidity Provision and the Forgotten Panic of 1929

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  • Mark Carlson
  • Kris James Mitchener
  • Gary Richardson

Abstract

Scholars differ on whether central bank intervention mitigates banking panics. In April 1929, a fruit fly infestation in Florida forced the U.S. government to quarantine fruit shipments from the state and destroy infested groves. In July, depositors panicked in Tampa and surrounding cities. The Federal Reserve Bank of Atlanta rushed currency to member banks beset by runs. We show that this intervention arrested the panic and estimate that bank failures would have been twice as high without the Federal Reserve's intervention. Our results suggest that similar interventions may have reduced bank failures during the Great Depression.

Suggested Citation

  • Mark Carlson & Kris James Mitchener & Gary Richardson, 2011. "Arresting Banking Panics: Federal Reserve Liquidity Provision and the Forgotten Panic of 1929," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 889-924.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/662961
    DOI: 10.1086/662961
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