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The Highs and the Lows: Bank failures in Sweden through inflation and deflation, 1914-1926

Kenny, Seán LU ; Ögren, Anders LU and Zhao, Liang LU (2023) In Lund Papers in Economic History
Abstract
This paper revisits the Swedish banking crisis (1919-26) that materialized as post war deflation replaced wartime inflation (1914-18). Inspired by Fisher’s ‘debt deflation theory’, we employ survival analysis to ‘predict’ which banks would fail, given certain ex-ante 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 i) leverage, ii) weaker collateral loans and iii) foreign borrowing during the boom were all associated with bank failure in post- war Sweden (1919-26).
Please use this url to cite or link to this publication:
author
; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
Banking crisis, survival analysis, early warning indicators, debt deflation, maturity mismatch, Sweden, E58, G01, G21, G28, N24
in
Lund Papers in Economic History
issue
2023:246
pages
91 pages
language
English
LU publication?
yes
id
5806378e-f9a8-4277-a793-372e233f399c
date added to LUP
2023-01-17 11:07:49
date last changed
2023-01-17 11:07:49
@misc{5806378e-f9a8-4277-a793-372e233f399c,
  abstract     = {{This paper revisits the Swedish banking crisis (1919-26) that materialized as post war deflation  replaced wartime inflation (1914-18). Inspired by Fisher’s ‘debt deflation theory’, we employ  survival analysis to ‘predict’ which banks would fail, given certain ex-ante 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  <br/>cause of bank distress in the crisis. Similarly, stronger growth in i) leverage, ii) weaker collateral  loans and iii) foreign borrowing during the boom were all associated with bank failure in post- war Sweden (1919-26).}},
  author       = {{Kenny, Seán and Ögren, Anders and Zhao, Liang}},
  keywords     = {{Banking crisis; survival analysis; early warning indicators; debt deflation; maturity mismatch; Sweden; E58; G01; G21; G28; N24}},
  language     = {{eng}},
  note         = {{Working Paper}},
  number       = {{2023:246}},
  series       = {{Lund Papers in Economic History}},
  title        = {{The Highs and the Lows: Bank failures in Sweden  through inflation and deflation, 1914-1926}},
  url          = {{https://lup.lub.lu.se/search/files/135049321/LUPEH_246.pdf}},
  year         = {{2023}},
}