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Reallocating Liquidity to Resolve a Crisis: Evidence from the Panic of 1873 / Haelim Anderson, Kinda Cheryl Hachem, Simpson Zhang.
- Format:
- Book
- Author/Creator:
- Anderson, Haelim.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28870.
- NBER working paper series no. w28870
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We study financial stability with constraints on central bank intervention in a model with belief-driven bank runs. A pecuniary externality arises in the decentralized market for interbank loans and leads to excessively many bank failures. A forced reallocation of liquidity across banks improves social welfare and can be implemented through the issuance of clearinghouse loan certificates, such as those issued in New York City during the Panic of 1873. A new dataset constructed from archival records reveals that the New York Clearinghouse issued loan certificates to member banks in the way our model suggests would have helped resolve the panic.
- Notes:
- Print version record
- May 2021.
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