Working Paper

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 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 shows that i) suspensions were more likely in cities whose banks had closer ties to New York, ii) banks with correspondents at the Panic’s center 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 networks; contagion; bank closures; panic of 1907;

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

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

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Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2022-09

Number: 2022-020