The Highs and the Lows : Bank failures in Sweden through inflation and deflation, 1914-1926
(2023) In European Review of Economic History 27(2). p.223-249- Abstract
- This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain exante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/332ecf86-8c0b-45eb-b68c-de417332ad57
- author
- Kenny, Seán LU ; Ögren, Anders LU and Zhao, Liang LU
- organization
- publishing date
- 2023-03-08
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Banking Crisis, Sweden, Debt Deflation, maturity mismatch, survival analysis, early warning indicators
- in
- European Review of Economic History
- volume
- 27
- issue
- 2
- pages
- 27 pages
- publisher
- Oxford University Press
- external identifiers
-
- scopus:85166180157
- ISSN
- 1474-0044
- DOI
- 10.1093/ereh/head001
- language
- English
- LU publication?
- yes
- id
- 332ecf86-8c0b-45eb-b68c-de417332ad57
- date added to LUP
- 2023-03-08 08:32:59
- date last changed
- 2023-11-06 11:09:44
@article{332ecf86-8c0b-45eb-b68c-de417332ad57, abstract = {{This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain exante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.}}, author = {{Kenny, Seán and Ögren, Anders and Zhao, Liang}}, issn = {{1474-0044}}, keywords = {{Banking Crisis; Sweden; Debt Deflation; maturity mismatch; survival analysis; early warning indicators}}, language = {{eng}}, month = {{03}}, number = {{2}}, pages = {{223--249}}, publisher = {{Oxford University Press}}, series = {{European Review of Economic History}}, title = {{The Highs and the Lows : Bank failures in Sweden through inflation and deflation, 1914-1926}}, url = {{http://dx.doi.org/10.1093/ereh/head001}}, doi = {{10.1093/ereh/head001}}, volume = {{27}}, year = {{2023}}, }