Date of Submission
Open Access Senior Thesis
Bachelor of Arts
Tanisha S. Sheth
Employing a granular hand-collected dataset, this paper studies the formation of local financial networks as a consequence of one of the largest bank failures during the Great Depression. The collapse of the National Bank of Kentucky caused ripples throughout the interbank network as 233 banks were faced with the decision to form new connections to reallocate reserves. Tracing over 1600 institutional linkages between 1929 and 1934, I evaluate the decision-making process of commercial banks under a nested logit framework. I find that peer effects and other regional metrics, contrary to national connectivity measures, act as principal determinants in network formation. Further, I show how the connections selected influenced bank survivorship.
Sheth, Tanisha, "A Choice Model for Correspondent Banking Relationships" (2020). CMC Senior Theses. 2428.