tailieunhanh - Market contagion : evidence from the panics of 1854 and 1857

Regulatory authorities have always been reluctant to grant the permission for entering lending business to savings banks. However, a certain number of (postal) savings banks (., “Caisse Nationale d’Epargne et de Prévoyance” (Algeria), (Botswana) Savings Bank, Caixa Economica (Cape Verde), Housing Finance Company Bank (Ghana), “Banque de l’Habitat” (Mali), Savings and Social Development Bank (Sudan), Post Bank (Uganda), (Tanzania) Postal bank, National Savings and Credit Bank (Zambia), and People’s Owned Savings Bank (Zimbabwe)) have managed to secure this permission from their authorities. And, whenever savings banks engage into lending, their market focus is hardly to extend microcredits but to develop. | fi A à O Research Repository UCD Provided by the author s and University College Dublin Library in accordance with publisher policies. Please cite the published version when available. Title Market contagion evidence from the panics of 1854 and 1857 Author s O Grada Cormac Kelly Morgan Publication Date 2000-12 Publication information American Economic Review 90 5 1110-1124 Publisher American Economic Association Link to publisher s version http aer contents 2 http direct true db eoh AN 0556175 site ehost-live This item s record more information http 10197 459 Rights All rights reserved Downloaded 2012-12-27T13 25 46Z Some rights reserved. For more information please see the item record link above. Market Contagion Evidence from the Panics of 1854 and 1857 By Morgan Kelly and Cormac o Grada To test a model of contagion where individuals hear some bad news and communicate it to their acquaintances who then pass it on leading to a market panic requires a knowledge of the information networks of participants something hitherto unavailable. For two panics in the 1850 s this paper examines the behavior of Irish depositors in a New York bank. A J recent immigrants their social network was determined largely by their place of origin in Ireland and where they lived in New York. During both panics this social network turns out to be the prime determinant of behavior. JEL G21 N21 The idea of market panics spreading through social contagion where individuals hear some bad news and communicate it to their acquaintances who pass it on in turn leading to a market panic goes back at least to David Ricardo 1951 p. 68 who attributed the panic leading to the suspension of convertibility in 1797 to the contagion of the unfounded fears of the timid part of the community. While suggestive evidence for the importance of networks of personal contact in financial markets is provided by the survey data of Robert J. .