The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s. / Raghuram Rajan, Rodney Ramcharan.

Format:

Book

Author/Creator:

Rajan, Raghuram.

Contributor:

National Bureau of Economic Research.

Ramcharan, Rodney.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18027.

NBER working paper series no. w18027

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

Does credit availability exacerbate asset price inflation? Are there long run consequences? During the farm land price boom and bust before the Great Depression, we find that credit availability directly inflated land prices. Credit also amplified the relationship between positive fundamentals and land prices, leading to greater indebtedness. When fundamentals soured, areas with higher credit availability suffered a greater fall in land prices and had more bank failures. Land prices and credit availability also remained disproportionately low for decades in these areas, suggesting that leverage might render temporary credit induced booms and busts persistent. We draw lessons for regulatory policy.

Notes:

Print version record

April 2012.