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The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s.

Raghuram Rajan, Rodney Ramcharan

NBER Working Paper No. 18027
Issued in April 2012, Revised in June 2020
NBER Program(s):Corporate Finance, Development of the American Economy, Monetary Economics

Does credit availability exacerbate asset price inflation? Are there long run consequences? During the farm land price boom and bust before the Great Depression, we find that credit availability directly inflated land prices. Credit also amplified the relationship between positive fundamentals and land prices, leading to greater indebtedness. When fundamentals soured, areas with higher credit availability suffered a greater fall in land prices and had more bank failures. Land prices and credit availability also remained disproportionately low for decades in these areas, suggesting that leverage might render temporary credit induced booms and busts persistent. We draw lessons for regulatory policy.

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Document Object Identifier (DOI): 10.3386/w18027

Published: Raghuram Rajan & Rodney Ramcharan, 2015. "The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s," American Economic Review, American Economic Association, vol. 105(4), pages 1439-77, April. citation courtesy of

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