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Banking, Currency, and Finance in Europe Between the Wars$
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Charles H. Feinstein

Print publication date: 1995

Print ISBN-13: 9780198288039

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198288034.001.0001

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Method in the Madness? Banking Crises Between the Wars, an International Comparison

Method in the Madness? Banking Crises Between the Wars, an International Comparison

Chapter:
(p.77) 2 Method in the Madness? Banking Crises Between the Wars, an International Comparison
Source:
Banking, Currency, and Finance in Europe Between the Wars
Author(s):

Joost Jonker

Jan Luiten van Zanden

Publisher:
Oxford University Press
DOI:10.1093/0198288034.003.0003

This investigation of the banking crises experienced in 12 European industrial countries and the USA attempts to establish a common pattern and to identify explanations for the timing and occurrence of the crises. The authors find that all crises occurred during years of deflation, but not every deflationary shock led to a run on the banks. In their view, the reasons why banks in some countries were vulnerable to such shocks, and others were not, are closely related to the differing degrees of inflation experienced during and just after the First World War. The conclusion drawn from the study is that the poor quality of the banks’ assets and the reduction in the liquidity associated with the increased commitments to industry were a leading cause of banking crises, but that nevertheless this lending had been a rational policy for the banks in countries that had suffered rapid inflation during and after the war.

Keywords:   assets, banking crises, deflation, Europe, First World War, industry, lending, liquidity, rationality, USA

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