Finance and Economics Discussion Series

<p>This paper examines the mechanism through which banking sector distress affects the availability of credit. We use the experience of the United States during the Great Depression a period of intense bank distress to conduct our analysis. We utilize previously neglected data from a 1934 survey conducted by the Federal Reserve System of both banks and Chambers of Commerce regarding the availability of credit and examine which aspects of the banking system collapse affected credit availability as indicated by the survey. A number of scholars have posited different ways that bank distress constrained credit availability and impacted economic activity during the 1930s; however the empirical evidence regarding these channels is modest. In this study we find that bank failures had the most dominant impact but there is also some evidence for the importance of funding constraints from deposit outflows and of protracted deposit liquidation.</p><p>This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact and remains as true to the original work as possible. Therefore you will see the original copyright references library stamps (as most of these works have been housed in our most important libraries around the world) and other notations in the work.</p><p>This work is in the public domain in the United States of America and possibly other nations. Within the United States you may freely copy and distribute this work as no entity (individual or corporate) has a copyright on the body of the work.</p><p>As a reproduction of a historical artifact this work may contain missing or blurred pages poor pictures errant marks etc. Scholars believe and we concur that this work is important enough to be preserved reproduced and made generally available to the public. We appreciate your support of the preservation process and thank you for being an important part of keeping this knowledge alive and relevant.</p>