The Founding of the Federal Reserve, the Great Depression and the Evolution of the U.S. Interbank Network

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

Jaremski, Matthew; Wheelock, David C.

doi:10.20955/wp.2019.002

Working Paper

The Founding of the Federal Reserve, the Great Depression and the Evolution of the U.S. Interbank Network

Abstract: Financial network structure is an important determinant of systemic risk. This paper examines how the U.S. interbank network evolved over a long and important period that included two key events: the founding of the Federal Reserve and the Great Depression. Banks established connections to correspondents that joined the Federal Reserve in cities with Fed offices, initially reducing overall network concentration. The network became even more focused on Fed cities during the Depression, as survival rates were higher for banks with more existing connections to Fed cities, and as survivors established new connections to those cities over time.

Keywords: Interbank Networks; Bank Concentration; Contagion; Systemically Important Financial Institutions; Federal Reserve Act; Great Depression;

JEL Classification: G21; L14; N22;

https://doi.org/10.20955/wp.2019.002