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 interbank transmission of financial distress in the Panic of 1907 and ensuing recession. Originating in New York City, the panic led to payment suspensions and emergency currency issuance in many cities. Data on the universe of interbank connections show that i) suspension was 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 in the panic and recession, 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