Harvests and Financial Crises in Gold-Standard America
Most American financial crises of the postbellum gold-standard era were caused by fluctuations in the cotton harvest due to exogenous factors such as weather. The transmission channel ran through export revenues and financial markets under the pre-1914 monetary regime. A poor cotton harvest depressed export revenues and reduced international demand for American assets, which depressed American stock prices, drained deposits from money-center banks and precipitated a business-cycle downturn - conditions that bred financial crises. The crises caused by cotton harvests could have been prevented by an American central bank, even under gold-standard constraints.
Thanks to Michael Bordo, Charles Calomiris, Joseph Ferrie, John James, Jon Moen, Hugh Rockoff, Alan Taylor, Ellis Tallman, Marc Weidenmier, David Weiman, Eugene White and Gavin Wright. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Hanes, Christopher & Rhode, Paul W., 2013. "Harvests and Financial Crises in Gold Standard America," The Journal of Economic History, Cambridge University Press, vol. 73(01), pages 201-246, March. citation courtesy of