The Credit-Anstalt Crisis of 1931

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Cambridge University Press, 1991 - Business & Economics - 205 pages
Austria played a prominent role in the worldwide events of 1931 as the largest bank in Central and Eastern Europe, the Viennese Credit-Anstalt, collapsed and led Europe into a financial panic that spread to other parts of the world. The events in Austria were pivotal to the economic developments of the 1930s, yet the literature about them is sparse. This book tries to fill this gap. Aurel Schubert analyzes the crisis using the leading theories of financial crises, identifies the causes of the crisis, examines the market's efficiency in predicting events, analyzes how the crisis was transmitted to the real sector, and studies the behavior of the Austrian as well as international authorities as lenders of last resort. His main conclusion is that even sixty years after the crisis, many of its lessons are still valid. Managerial and regulatory deficiencies led to the collapse of the bank; the subsequent currency crisis was not an irrational and unexplainable panic by a confused public, but rather a rational response to inconsistencies in policy; and the reactions of the largely unprepared authorities--in Austria as well as abroad--did not help in resolving the crisis quickly.
 

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Contents

1 Introduction
1
2 Diary of the crisis
7
3 Financial crisis theories and the Austrian experience of 1931
19
4 The causes of the financial crisis
31
5 The financial crisis and market efficiency
65
6 The financial crisis and economic activity
98
7 The financial crisis and the lender of last resort
141
8 Alternative policies and policy implications
168
9 Conclusions
185
Bibliography
191
Index
203
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