Credit expansion, leverage, and banking distress: the puzzle of interwar Italy

2023/07/25 by Marco Molteni · 1 voice
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Global Financial Crisis and Policies #Italy: Economic History and Contemporary Issues

paper · pdf · doi:10.1093/ereh/head012

openalex publication_date 2023/07/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/31

Abstract

Abstract This study analyses the relationship between lending growth, leverage, and distress at the individual bank level for interwar Italy, which experienced remarkable credit expansion in the 1920s. Novel data from archival research based on banking supervision classified documents reveals a large, albeit forgotten, crisis. A puzzle emerges: regression analysis on individual bank balance sheets indicates that leverage and lending growth are not predictors of distress. Complementary indicators show that the features highlighted in the literature on leveraged credit booms do not apply to Italy. Italy’s credit expansion was not a leverage-fuelled credit boom but a process of financial development.

Citations

• Fundamentals, Panics, and Bank Distress During the Depression

Discussions

• New paper published in print on European Review of Economic History: "Credit expansion, leverage, and banking distress: the puzzle of interwar Italy" Read the full paper here (Open Access): doi.org/ [bsky, 3 points, 1 comments]

Related

• Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008
• The Italian Crisis and Producer Households Debt: a Source of Stability? A Reproducible Research
• Credit Allocation and Macroeconomic Fluctuations
• Fresh perspectives on cross–border banking in the 20th century: new evidence of Italian correspondent banking
• When Credit Bites Back