Interbank Networks and the Interregional Transmission of Financial Crises: Evidence from the Panic of 1907

RePEc Short ID: pwh4
ORCID iD: 0000-0002-2702-8164

Jaremski, Matthew; Wheelock, David C.

doi:10.20955/wp.2022.020

Working Paper Revision

Interbank Networks and the Interregional Transmission of Financial Crises: Evidence from the Panic of 1907

Abstract: This paper provides quantitative evidence on the interbank network’s role in transmitting the Panic of 1907 and ensuing recession across the United States. Originating in a few New York City banks and trust companies, the panic led to payment suspensions and emergency currency issuance in many cities. Data on the universe of correspondent relationships show that i) suspensions were more likely in cities whose banks had closer ties to banks at the center of the panic, ii) banks with such links were more likely to close, and iii) banks responded to the panic by rearranging their correspondent relationships, with implications for network structure.

Keywords: banking panics; interbank network; contagion; bank closures; Panic of 1907;

JEL Classification: E42; E44; G01; G21; N11; N21;

https://doi.org/10.20955/wp.2022.020