The effect of cash injections: Evidence from the 1980s farm debt crisis

Nittai K. Bergman, Rajkamal Iyer, Richard T. Thakor

Research output: Contribution to journalReview articlepeer-review

9 Scopus citations


What is the effect of cash injections during financial crises? Exploiting county-level variation arising from random weather shocks during the 1980s Farm Debt Crisis, we analyze and measure the effect of local cash flow shocks on the real and financial sector. We show that such cash flow shocks have significant impact on a host of economic outcomes, including land values, loan delinquency rates, and the probability of bank failure. Further, we measure how cash injections affect local labor markets, analyzing the impact on employment and wages both within and outside of the sector receiving a positive cash flow shock. Estimates of the effect of local cash flow shocks on county income levels during the financial crisis yield a multiplier of 1.63.
Original languageEnglish (US)
Pages (from-to)5092-5130
Number of pages39
JournalReview of Financial Studies
Issue number11
StatePublished - 2020

Bibliographical note

Funding Information:
We thank Daron Acemoglu, Jean-Noel Barrot, Douglas Diamond, Mike Duffy, Emre Ergungor, Mariassunta Giannetti, Radha Gopalan, Michelle Hanlon, Richard Hornbeck, Dirk Jenter, Nobuhiro Kiyotaki, Debbie Lucas, Atif Mian, Anna Mikusheva, Ben Olken, Jonathan Parker, David Robinson, Greg Salton, Antoinette Schoar, Alp Simsek, Jeremy Stein, James Stock, Phil Strahan (the editor), Anjan Thakor, and Sharon Waltman; an anonymous referee; the Farm Credit System Associations; and seminar participants at HEC, INSEAD, IDC, MIT, Ohio State University, Oxford, Tel Aviv University, University of Minnesota, Washington University in St. Louis, the 2016 American Economic Association Meetings, the NBER Monetary Economics Summer Institute, and the Financial Intermediation Research Society Conference for helpful discussions and comments. We also thank John Schroeter and Iowa State University for their assistance with coordinating data collection. Bergman thanks the Pinhas Sapir Center for Development for financial support. Supplementary data can be found on The Review of Financial Studies web site. Send correspondence to Richard Thakor, University of Minnesota, 321 19th Avenue South, 3-255, Minneapolis, MN 55455; telephone: (612) 626-7817. E-mail:

Publisher Copyright:
© The Author(s) 2020.


  • Financial Crises
  • Financial Accelerator
  • Cash-in-the-Market Pricing
  • Fiscal Multiplier


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