Essays on Finance and Real Activity during the U.S. National Banking Period

Abstract

Under the National Banking Acts of 1863 and 1864, the U.S. banking system simultaneously experienced immense growth and also severe financial instability stemming from nationwide banking panics. This dissertation explores both aspects of this period. The first chapter demonstrates that the wave of railroad failures during the Panic of 1873 intensified financial constraints in the railroad industry and amplified the effects of the crisis on real activity. Furthermore, it identifies government subsidies (in the form of land grants) as a key factor in increasing the probability of failure for recipient railroads. The second chapter studies the role of regulatory competition between federal and state governments in promoting banking efficiency and contributing to economic growth. The results indicate that the expansion of state banking, facilitated by the passage of state-level free banking laws, decreased monopoly power in rural markets and contributed to the growth of agricultural capital and output. The final chapter, coauthored with Peter Rousseau and Matthew Jaremski, shows that silver coinage, particularly the use of silver money to back bank deposits, played an important role in allowing the national banking system to continue to expand during the 1880s and early 1890s.