SOURCES OF PANICS - EVIDENCE FROM THE WEEKLY DATA

We use weekly data (1867-1933) to investigate the sources of banking and financial panics. We find that, while a panic's exact starting date is unpredictable, one can identify environments conducive to panics; a lack of liquidity in financial markets seems to be a key source. Results also reveal the effectiveness of the Aldrich-Vreeland Act in elastizing the money supply and shortening the panic of 1914 and suggest that the panic of 1933 may have been caused by a speculative attack on the gold-backed US dollar via the banks, as opposed to a run on the banks directly.