Network Contagion and Interbank Amplification during the Great Depressio

This is the title of a recent CEPR Working Paper by Kris James Mitchener and Gary Richardson. Their findings show that interbank networks amplified the contraction in lending during the Great Depression. Banking panics induced banks in the hinterland to withdraw interbank deposits from Federal Reserve member banks located in reserve and central reserve cities. These correspondent banks responded by curtailing lending to businesses. Between the peak in the summer of 1929 and the banking holiday in the winter of 1933, interbank amplification reduced aggregate lending in the US economy by an estimated 15 percent.

Kris Mitchener is an economic historian who has, in earlier work, explored why countries adopt fixed exchange rate systems, how fixed exchange rates impact sovereign debt spreads, how sovereign debt claims are enforced and how empires, currency unions, and fixed exchange rate systems impact trade flows between countries. He has published, inter alia, in the Journal of Political Economy, the Journal of Economic Growth, Economic Journal and the Journal of Economic History.

Kris Mitchener is Robert and Susan Finocchio Endowed Chair Professor of Economics at Santa Clara University, California. He is also Research Associate at NBER, Research Fellow at CEPR and Research Associate at the Centre for the Competitive Advantage of the Global Economy (CAGE). He was Professor of Economics at the University of Warwick from 2012 to 2014 and has held visiting positions at Stanford University (Hoover Institution), the Bank of Japan, the St. Louis Federal Reserve Bank, UCLA, and CREi at Universitat Pompeu Fabra. He is presently co-editor of Explorations in Economic History and serves on the editorial boards of Cliometrica, Financial History Review and Economics. He holds a PhD in Economics from the University of California Berkeley.