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Conference Paper
Bank capital structures and the demand for liquid assets
Working Paper
Deposit insurance, bank capital structures and the demand for liquidity
This paper provides an economic explanation for the extraordinary and historically unprecedented accumulation of liquid assets by the banking system in the aftermath of the Great Depression. At the end of the decade (1938 to 1939) the banking system held over 35 percent of their assets in non-interest bearing cash. Why are these holdings so high and why didn't we observe the same phenomenon in Canada? My theory is that, contrary to what happened in Canada, U.S. banks came out of the Depression severely undercapitalized and they did not immediately replenish the capital account because, at the ...