Banking Crises Under a Microscope

This paper highlights problems with existing narrative chronologies of banking crises and showcases new quantitative approaches for reconstructing and analyzing the global history of banking crises. Using a historical panel of bank equity returns across 46 countries, this paper puts forward two new results demonstrating how banking crises in advanced economies have changed over time. First, I show that, although unlevered bank equity losses are lower for post-1945 crises (relative to pre-1914 crises), bank equity losses are considerably greater, due to higher bank leverage. Second, in the pre-1914 period, bank equity returns are sensitive to trade, commodity, and monetary gold shocks, but much less so to real estate returns and past credit booms—whereas the exact opposite is true in the post-1945 period