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Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

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  • Kris James Mitchener

Abstract

Drawing on the variation in financial distress across U.S. states during the Great Depression, this article suggests how bank supervision and regulation affected banking stability during the Great Depression. In response to well-organized interest groups and public concern over the bank failures of the 1920s, many U.S. states adopted supervisory and regulatory standards that undermined the stability of state banking systems in the 1930s. Those states that prohibited branch banking, had higher reserve requirements, granted their supervisors longer term lengths, or restricted the ability of supervisors to liquidate banks quickly experienced higher state bank suspension rates from 1929 to 1933.

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  • Kris James Mitchener, 2006. "Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression," NBER Working Papers 12074, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12074
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    Cited by:

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    2. Merim KASUMOVIĆ & Mirna MEŠIĆ, 2018. "Macroprudential stability indicators of financial systems: Analysis of Bosnia and Herzegovina and Croatia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(614), S), pages 41-54, Spring.
    3. Randall S. Kroszner & Philip E. Strahan, 2014. "Regulation and Deregulation of the US Banking Industry: Causes, Consequences, and Implications for the Future," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 485-543, National Bureau of Economic Research, Inc.

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    JEL classification:

    • N2 - Economic History - - Financial Markets and Institutions
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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