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Si us plau utilitzeu sempre aquest identificador per citar o enllaçar aquest document: https://hdl.handle.net/2445/226491

Goodbye connections, hello Bagehot: democratization, lender of last resort independence and bank failures in Spain in 1931

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Did democratization reduce the likelihood of politically connected bank bailouts in the past? What role did private central banks play as independent lenders of last resort? To answer these questions, this article provides new detailed archival evidence on the causes of bank failures in Spain in July 1931. We show how, on the back of a safety net provided by close connections to the Primo de Rivera dictatorship (1923–30), bankers embarked in a rapid and outward-oriented expansion characterized by politically driven credit misallocation and risk-shifting on the eve of the Great Depression. Transition to democracy with the coming of the Spanish Second Republic in April 1931 terminated the safety net provided by these connections and the collapse of international trade and finance caused insolvency to surface. Democratic fiscal authorities clashed with the opposition of Banco de España – the privately owned lender of last resort – to share losses stemming from a bailout, resulting in bank failures.

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JORGE-SOTELO, Enrique. Goodbye connections, hello Bagehot: democratization, lender of last resort independence and bank failures in Spain in 1931. _Economic History Review_. 2025. Vol. 79, núm. 1, pàgs. 89-132. [consulta: 31 de gener de 2026]. ISSN: 0013-0117. [Disponible a: https://hdl.handle.net/2445/226491]

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