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Bank networks and suspensions in the 1893 panic: evidence from the state banks and their correspondents in Kansas

Published online by Cambridge University Press:  07 November 2017

Brandon Dupont
Brandon Dupont*
Affiliation:
Western Washington University
*
B. Dupont, Department of Economics, Western Washington University, 516 High Street, Bellingham, WA 98225-9074, USA; email: [email protected].
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Abstract

Using individual balance sheet data from the state banks in one state that was deeply impacted by the 1893 crisis, this article presents evidence that correspondent networks played an important role in transmitting the crisis. In particular, the unexpected closure of a single large national bank in Kansas City considerably increased the probability of suspension among the state banks that were connected to it through the correspondent networks. This episode thus illustrates how contagion can spread through interbank networks and sheds new light on the nature of the 1893 crisis.

Keywords

bank crisespanic of 1893bank correspondents

JEL classification

G21: Banks • Depository Institutions • Micro Finance Institutions • Mortgages G01: Financial Crises N21: U.S. • Canada: Pre-1913
Type
Articles
Information
Financial History Review , Volume 24 , Issue 3 , December 2017 , pp. 265 - 282
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Copyright
Copyright © European Association for Banking and Financial History e.V. 2017 

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Footnotes

Thanks to Rebecca Christensen for excellent research assistance and to the Kansas State Historical Society for providing access to the historical newspapers used in this project. I am also grateful to the editor and two anonymous referees for important suggestions, insight and guidance. Any remaining errors are my own.

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