Article "The highs and the lows: bank failures in Sweden through inflation and deflation, 1914–1926"


The article is written by Postdoc Séan Kenny at the Department of Economic History, LU, Professor Anders Ögren at the Department of Economic History, UU and Liang Zhao, PhD student at the Department of Economic History, LU. The article is published in the European Review of Economic History.


This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain ex-ante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.

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