The German Twin Crisis of 1931
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- 1 September 2004
- journal article
- research article
- Published by Cambridge University Press (CUP) in The Journal of Economic History
- Vol. 64 (3) , 822-871
- https://doi.org/10.1017/s0022050704002980
Abstract
Using information on banks' balance sheets, I analyze the causal links between the banking and currency problems in the German crisis of 1931. I find that the crisis had two independent causes: Political shocks triggered a run on the Reichsmark; and the excessive risk-taking by banks that were “too big to fail” led to a run on banks. Due to the high level of foreign debt in the banking system, the run on the currency and the deposit withdrawals reinforced each other in a vicious circle and resulted in a banking panic and the abandonment of the gold standard.Keywords
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