Flight-to-Safety and the Credit Crunch: A New History of the Banking Crisis in France During the Great Depression

59 Pages Posted: 5 Nov 2018

See all articles by Patrice Baubeau

Patrice Baubeau

University Paris Nanterre

Eric Monnet

Banque de France; Paris School of Economics (PSE)

Angelo Riva

European Business School Paris

Stefano Ungaro

Banque de France; French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2018

Abstract

Despite France's importance in the interwar world economy, the scale and consequences of the French banking crises of 1930-1931 were never assessed quantitatively due to lack of data in the absence of banking regulation. Using a new dataset of individual balance sheets from more than 400 banks, we show that the crisis was more severe and occurred earlier than previously thought, and it was very asymmetric, without affecting main commercial banks. The primary transmission channel was a flight-to-safety of deposits from banks to savings institutions and the central bank, leading to a major, persistent disruption in business lending. In line with the gold standard mentality, cash deposited with savings institutions and the central bank was used to decrease marketable public debt and increase gold reserves, rather than pursue countercyclical policies. Despite massive capital inflows, France suffered from a severe, persistent credit crunch.

Keywords: banking panics, flight-to-safety, France, gold standard, Great Depression, Savings Banks

JEL Classification: E44, E51, E58, G01, G21, G23, G33, N14, N24

Suggested Citation

Baubeau, Patrice and Monnet, Eric and Riva, Angelo and Ungaro, Stefano, Flight-to-Safety and the Credit Crunch: A New History of the Banking Crisis in France During the Great Depression (October 2018). CEPR Discussion Paper No. DP13287, Available at SSRN: https://ssrn.com/abstract=3278662

Patrice Baubeau (Contact Author)

University Paris Nanterre ( email )

200 avenue de la république
Nanterre
France

Eric Monnet

Banque de France ( email )

Paris
France

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Angelo Riva

European Business School Paris ( email )

37/39 Boulevard Murat
Paris, 75016
France

Stefano Ungaro

Banque de France ( email )

Paris
France

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR) ( email )

Paris
France

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