Money Doctor's se: Seán Kenny, Anders Ögren & Liang Zhao "The Highs and the Lows: Bank Failures in Sweden through inflation and deflation, 1913-1926"

  • Date: –17:00
  • Location: via Zoom
  • Lecturer: Seán Kenny (Lund University), Anders Ögren (Uppsala University) and Liang Zhao (Lund University)
  • Organiser: Department of Economic History / UCBH
  • Contact person: Anders Ögren
  • Seminarium

Money Doctor's Financial Stability (Online) Seminars

In 1920-22, Sweden witnessed its most acute crisis of the last 150 years. While several well described factors coincided to cause and aggravate the 1920s crisis, the classic question remains, ‘what were the reasons that some banks failed and others survived?’ For this paper, we have constructed a unique database consisting of relevant balance sheet ratios of all Swedish commercial banks for the period 1913-27. We have documented and classified distressed and non-distress banks and employ survival analysis (logit regression) to ‘predict’ their subsequent fates. Our tests find that liabilities with increasingly shorter maturities were a significant predictor of failure. We also find, in line with Fisher’s debt deflation theory, those banks that had expanded lending most during the inflationary wartime period, were most likely to succumb in deflation of the 1920s. Finally, we show that extensive pre crisis foreign borrowing was a significant determinant of failure in the 1920s crisis.