Highlights :

• Banking crises of the Great Depression coincided with a sharp international increase in deposits at savings institutions and life insurance.
• This flight-to-safety fuelled a credit crunch since other institutions did not replace bank lending.
• Savings held in savings institutions and life insurance companies increased as a share of GDP and in real terms.
• These findings provide new explanations of the fall in credit and aggregate demand in the 1930s.
• They illustrate the need to consider nonbank financial institutions when studying banking crises.

 Abstract :
New data covering 23 countries reveal that banking crises of the Great Depression coincided with a sharp international increase in deposits at savings institutions and life insurance. Deposits fled from commercial banks to alternative forms of savings. This fuelled a credit crunch since other institutions did not replace bank lending. While asset prices fell, savings held in savings institutions and life insurance companies increased as a share of GDP and in real terms. These findings provide new explanations of the fall in credit and aggregate demand in the 1930s. They illustrate the need to consider nonbank financial institutions when studying banking crises.

 Keywords : Great Depression | Banking Crises | Precautionary Savings | Paradox of Thrift | Savings Banks

 JEL : B22, E21, E51, G01, G21, N2