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The Macroeconomic Effects of Banking Crises: Evidence from the United Kingdom, 1750-1938

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  • Jason Lennard
  • Seán Kenny
  • John D. Turner

Abstract

This paper investigates the macroeconomic effects of UK banking crises over the period 1750 to 1938. We construct a new annual banking crisis series using bank failure rate data, which suggests that the incidence of banking crises was every 30 or so years. Using our new series and a narrative approach to identify exogenous banking crises, we find that industrial production contracts by 8.2 per cent in the year following a crisis. This finding is robust to a battery of checks, including different VAR specifications, different thresholds for the crisis indicator, and the use of a capital-weighted bank failure rate.

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  • Jason Lennard & Seán Kenny & John D. Turner, 2017. "The Macroeconomic Effects of Banking Crises: Evidence from the United Kingdom, 1750-1938," National Institute of Economic and Social Research (NIESR) Discussion Papers 478, National Institute of Economic and Social Research.
    • Handle: RePEc:nsr:niesrd:478
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    Cited by:

    1. Kenny, Seán & Turner, John D., 2018. "Wildcat Bankers or Political Failure? The Irish Financial Pantomime, 1797-1826," Lund Papers in Economic History 176, Lund University, Department of Economic History.
    2. Braggion, Fabio & Dwarkasing, Narly & Moore, Lyndon, 2022. "Value creating mergers: British bank consolidation, 1885–1925," Explorations in Economic History, Elsevier, vol. 83(C).
    3. repec:pra:mprapa:117955 is not listed on IDEAS
    4. Schneider, Benjamin & Vipond, Hillary, 2023. "The past and future of work: how history can inform the age of automation," Economic History Working Papers 119282, London School of Economics and Political Science, Department of Economic History.
    5. Kenny, Seán & Ögren, Anders & Zhao, Liang, 2023. "The Highs and the Lows: Bank failures in Sweden through inflation and deflation, 1914-1926," Lund Papers in Economic History 246, Lund University, Department of Economic History.
    6. Jason Lennard, 2020. "Uncertainty and the Great Slump," Economic History Review, Economic History Society, vol. 73(3), pages 844-867, August.
    7. Kenny, Seán & Lennard, Jason & Turner, John D., 2021. "The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938," Explorations in Economic History, Elsevier, vol. 79(C).
    8. Kenny, Seán & Turner, John D., 2018. "Wildcat bankers or political failure? The Irish financial pantomime, 1797-1826," QUCEH Working Paper Series 2018-07, Queen's University Belfast, Queen's University Centre for Economic History.
    9. Kenny, Sean & Ögren, Anders & Zhao, Liang, 2023. "The highs and the lows: Bank failures in Sweden through inflation and deflation, 1914-1926," QUCEH Working Paper Series 23-03, Queen's University Belfast, Queen's University Centre for Economic History.

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    More about this item

    Keywords

    banking crisis; bank failures; narrative approach; macroeconomy; United Kingdom;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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