Report

Bank collapse and depression

Abstract: The recurrent banking panics of the 19th century and the Great Depression of the 1930s are widely viewed as failures of our economic system. A simple version of Samuelson?s overlapping generations model is used to generate such failures of Walrasian equilibrium. The spontaneous ?panics? generated involve a collapse of bank credit, causing in turn a drop in investment demand. The model suggests that both the recent technological advances in the intermediation industry and the current move towards deregulation of that industry are ominous developments.

https://doi.org/10.21034/sr.56

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 1980

Number: 56