The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938

Seán Kenny; Jason Lennard; John D. Turner

doi:10.1016/j.eeh.2020.101357

The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938

Seán Kenny
, Jason Lennard
, John D. Turner

Research output: Contribution to journal › Article › peer-review

Abstract

This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.

Original language	English
Article number	101357
Journal	Explorations in Economic History
Volume	79
DOIs	https://doi.org/10.1016/j.eeh.2020.101357
Publication status	Published - Jan 2021
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Keywords

Banking crisis
Macroeconomy
Narrative identification
United Kingdom
Vector autoregression

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10.1016/j.eeh.2020.101357

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abstract = "This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.",

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AB - This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.

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KW - Macroeconomy

KW - Narrative identification

KW - United Kingdom

KW - Vector autoregression

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The macroeconomic effects of banking crises: Evidence from the United Kingdom, 1750–1938

Abstract

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Keywords

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