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The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s

Raghuram Rajan and Rodney Ramcharan

No 18027, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does credit availability exacerbate asset price inflation? Are there long run consequences? During the farm land price boom and bust before the Great Depression, we find that credit availability directly inflated land prices. Credit also amplified the relationship between positive fundamentals and land prices, leading to greater indebtedness. When fundamentals soured, areas with higher credit availability suffered a greater fall in land prices and had more bank failures. Land prices and credit availability also remained disproportionately low for decades in these areas, suggesting that leverage might render temporary credit induced booms and busts persistent. We draw lessons for regulatory policy.

JEL-codes: G01 G21 N1 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-agr and nep-his
Note: CF DAE ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published as Raghuram Rajan & Rodney Ramcharan, 2015. "The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s," American Economic Review, American Economic Association, vol. 105(4), pages 1439-77, April.

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Journal Article: The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s (2015) Downloads
Working Paper: The anatomy of a credit crisis: the boom and bust in farm land prices in the United States in the 1920s (2012) Downloads
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