Accelerating into the Abyss: Financial Dependence and the Great Depression

100 Pages Posted: 12 Dec 2013 Last revised: 30 Jul 2019

See all articles by Mrdjan Mladjan

Mrdjan Mladjan

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance, Accounting and Real Estate

Date Written: July 25, 2019

Abstract

This paper gives new evidence for the importance of bank suspensions during the Great Depression. I establish that more financially dependent manufacturing industries exhibited steeper declines in output relative to peers. This differential is largest in states that were most affected by banking suspensions, and the same pattern also holds for value added, number of establishments, and employment. The findings are based on a new measure of financial dependence, designed for deep recessions, and a new instrument of bank suspensions. The results show that bank suspensions could explain a third of the decline in manufacturing output during the Great Depression.

Keywords: Bank Failures, Great Depression, Economic Growth, Manufacturing

JEL Classification: E32, G21, L60, N12, N22, N62

Suggested Citation

Mladjan, Mrdjan, Accelerating into the Abyss: Financial Dependence and the Great Depression (July 25, 2019). Available at SSRN: https://ssrn.com/abstract=2366291 or http://dx.doi.org/10.2139/ssrn.2366291

Mrdjan Mladjan (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance, Accounting and Real Estate ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

HOME PAGE: http://www.ebs.edu/en/person/mrdjan-mladjan

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