Bank Runs, Information and Contagion in the Panic of 1893

Contagious bank runs, which spread to both solvent and insolvent banks, should not occur if bank-specific information is provided regularly to the banking public. By mitigating the information asymmetry between banks and depositors, information should restrict runs to insolvent banks. However, official bank statements collected from quarterly reports to local newspapers in Kansas demonstrate that runs did become contagious in the 1893 panic even in an information-rich banking system. Important differences between national and non-national banks were also found, which suggests the maturity of the regulatory system may have played an important role in the panic.

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