Banking Crises in Historical Perspective
This paper surveys the recent empirical literature on historical banking crises, defined as events taking place before 1980. Advances in data collection and identification have provided new insights into the causes and consequences of crises both immediately and over the long run. We highlight three overarching threads that emerge from the literature: first, leverage in the financial system is a systematic precursor to crises; second, crises have negative effects on the real economy; and third, government interventions can ameliorate these effects. Contrasting historical episodes reveals that the process of crisis formation and evolution does vary significantly across time and space. Thus, we also highlight specific institutions, regulations and historical contexts that give rise to these divergent experiences. We conclude by identifying important gaps in the literature and discussing avenues for future research.
We thank Effi Benmelech, Michael Bordo, Eric Hilt, Eric Monnet, Dimitris Papanikolaou, Alan Taylor and an anonymous reviewer for very helpful comments. Olena Bogdan, Isabella Grace Duncan, William Halverson, and Qirui Wang provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.