Working Paper Series
Local Banking Panics of the 1920s:
Identification and Determinants
Published as: “Local Banking Panics of the 1920s: Identification and
Determinants”, Journal of Monetary Economics 66, (2014): 164-177.
Lee K. Davison
Federal Deposit Insurance Corporation
Carlos D. Ramirez
George Mason University
and
Federal Deposit Insurance Corporation
First Version: November 2012
Current Version: April 2014
FDIC CFR WP 2014-01
fdic.gov/cfr
NOTE: Staff working papers are preliminary materials circulated to stimulate discussion and critical
comment. The analysis, conclusions, and opinions set forth here are those of the author(s) alone and do
not necessarily reflect the views of the Federal Deposit Insurance Corporation. References in publications
to this paper (other than acknowledgment) should be cleared with the author(s) to protect the tentative
character of these papers.
Local Banking Panics of the 1920s:
Identification and Determinants
Published as: “Local Banking Panics of the 1920s: Identification and
Determinants”, Journal of Monetary Economics 66, (2014): 164-177.
Lee K. Davison
Federal Deposit Insurance Corporation
Carlos D. Ramirez
George Mason University
and
Federal Deposit Insurance Corporation
First Version: November 2012
Current Version: April 2014
FDIC CFR WP 2014-01
fdic.gov/cfr
NOTE: Staff working papers are preliminary materials circulated to stimulate discussion and critical
comment. The analysis, conclusions, and opinions set forth here are those of the author(s) alone and do
not necessarily reflect the views of the Federal Deposit Insurance Corporation. References in publications
to this paper (other than acknowledgment) should be cleared with the author(s) to protect the tentative
character of these papers.
Local Banking Panics of the 1920s: Identification and Determinants*
Lee K. Davison
Division of Insurance and Research
Federal Deposit Insurance Corporation
Carlos D. Ramirez**
Department of Economics
George Mason University
and
Center for Financial Research
Federal Deposit Insurance Corporation
Abstract
Using a newly discovered dataset of U.S. bank suspensions from 1921 to 1929, we discovered that banking panics
were more common in the 1920s than had been believed. Besides identifying panics, we investigate their
determinants, finding that local banking panics were more likely when fundamental economic conditions were
generally weak and more likely in “overbanked” states; they were less likely in states with deposit insurance or
states where a relatively large share of banks belonged to chain banking organizations.
JEL Classification Codes: N22, G21
Keywords: Bank Runs, Banking Panics, Cluster Analysis, U.S. Banking History
May 2014
Opinions expressed in this paper are those of the authors
and not necessarily those of the FDIC.
* We would like to thank, without implicating, Mark Carlson, Gary Gorton, Myron Kwast, Paul Kupiec, Gary
Richardson, and participants at an FDIC workshop, the GMU Economic History Seminar Series, and at the Central
Banking in Historical Perspective Conference at the Federal Reserve Bank of San Francisco. We gratefully
acknowledge the superb research assistance of Ashley Mihalik, Lily Freedman, Juan Srolis, Kayla Shoemaker, and
Cody Hyman.
** Corresponding author: Carlos D. Ramirez, Department of Economics, George Mason University, 4400 University
Drive, Fairfax, VA 22030-4444, Tel. 703-993-1145, e-mail: cramire2@gmu.edu
Lee K. Davison
Division of Insurance and Research
Federal Deposit Insurance Corporation
Carlos D. Ramirez**
Department of Economics
George Mason University
and
Center for Financial Research
Federal Deposit Insurance Corporation
Abstract
Using a newly discovered dataset of U.S. bank suspensions from 1921 to 1929, we discovered that banking panics
were more common in the 1920s than had been believed. Besides identifying panics, we investigate their
determinants, finding that local banking panics were more likely when fundamental economic conditions were
generally weak and more likely in “overbanked” states; they were less likely in states with deposit insurance or
states where a relatively large share of banks belonged to chain banking organizations.
JEL Classification Codes: N22, G21
Keywords: Bank Runs, Banking Panics, Cluster Analysis, U.S. Banking History
May 2014
Opinions expressed in this paper are those of the authors
and not necessarily those of the FDIC.
* We would like to thank, without implicating, Mark Carlson, Gary Gorton, Myron Kwast, Paul Kupiec, Gary
Richardson, and participants at an FDIC workshop, the GMU Economic History Seminar Series, and at the Central
Banking in Historical Perspective Conference at the Federal Reserve Bank of San Francisco. We gratefully
acknowledge the superb research assistance of Ashley Mihalik, Lily Freedman, Juan Srolis, Kayla Shoemaker, and
Cody Hyman.
** Corresponding author: Carlos D. Ramirez, Department of Economics, George Mason University, 4400 University
Drive, Fairfax, VA 22030-4444, Tel. 703-993-1145, e-mail: cramire2@gmu.edu