CONTAGIOUS BANK RUNS - EVIDENCE FROM THE 1929-1933 PERIOD

This paper empirically examines contagion effects of bank failures by analyzing the behavior of deposit flows in a sample of failed and heal thy banks over the 1929-1933 period. We find evidence of contagion for 1930-1932, while none seems to have existed in 1929 or 1933. In addit ion, the pace of contagion accelerated over 1930-1932. We find that ev en during 1930-1932, failing-bank deposit outflows, exceeded those at a matched control sample of nonfailing banks. This finding is consiste nt with the presence of a significant number of informed depositors wh o distinguished among ex ante failing and nonfailing banks. (C) 1996 A cademic Press, Inc.