Crises and the Development of Economic Institutions: Some Microeconomic Evidence
Raghuram Rajan, Rodney Ramcharan
American Economic Review · 2016 · Volume 106 · Issue 5
Abstract
This paper studies the long run effects of financial crises using new bank and town level data from around the Great Depression. We find evidence that banking markets became much more concentrated in areas that experienced a greater initial collapse in the local banking system. There is also evidence that financial regulation after the Great Depression, and in particular limits on bank branching, may have helped to render the effects of the initial collapse persistent. All of this suggests a reason why post-crisis financial regulation, while potentially reducing financial instability, might also have longer run real consequences.
Keywords
Institutions: Design, Formation, Operations, and Impact, Business Fluctuations, Cycles, Financial Crises, Banks, Depository Institutions, Micro Finance Institutions, Mortgages, Financial Institutions and Services: Government Policy and Regulation, Economic History: Macroeconomics and Monetary Economics, Industrial Structure, Growth, Fluctuations: U.S., Canada: 1913-, Economic History: Financial Markets and Institutions: U.S.
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