The Journal of Economic History


Harvests and Financial Crises in Gold Standard America

Christopher Hanesa1 and Paul W. Rhodea2

a1 Professor, Department of Economics, State University of New York at Binghamton, P.O. Box 6000, Binghamton, NY 13902. E-mail:

a2 Professor, Department of Economics, 611 Tappan Street, 205 Lorch Hall, Ann Arbor, MI 48109-1220, and NBER. E-mail:


Most American financial crises of the postbellum gold standard era were caused by fluctuations in the cotton harvest due to exogenous factors such as weather. The transmission channel ran through export revenues and financial markets under the pre-1914 monetary regime. A poor cotton harvest depressed export revenues and reduced international demand for American assets, which depressed American stock prices, drained deposits from money center banks and precipitated a business cycle downturn—conditions that bred financial crises. The crises caused by cotton harvests could have been prevented by an American central bank, even under gold standard constraints.