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Financial Factors in the Great Depression

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  • Charles W. Calomiris

Abstract

Macroeconomists have long argued that financial markets were important sources and propagators of decline during the Great Depression. Turning points during the Depression often coincided with or were preceded by dramatic events in financial markets: stock market collapse, waves of bankruptcy and bank failure, and contractions in the money stock. But the mechanism through which financial factors contributed to the Depression has been a source of controversy, as has been the relative importance of financial factors in explaining the origins and persistence of the Depression. This essay reviews the literature on the role of financial factors in the Depression and draws some lessons that have more general relevance for the study of the Depression and for macroeconomics.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.7.2.61
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 7 (1993)
Issue (Month): 2 (Spring)
Pages: 61-85

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Handle: RePEc:aea:jecper:v:7:y:1993:i:2:p:61-85

Note: DOI: 10.1257/jep.7.2.61
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  1. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers 41, University of California at Berkeley.
  2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  3. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
  4. Wicker, Elmus, 1980. "A Reconsideration of the Causes of the Banking Panic of 1930," The Journal of Economic History, Cambridge University Press, vol. 40(03), pages 571-583, September.
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  8. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, octubre-d.
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  10. White, Eugene N, 1990. "The Stock Market Boom and Crash of 1929 Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 67-83, Spring.
  11. W. Braddock Hickman, 1960. "Statistical Measures of Corporate Bond Financing Since 1900," NBER Books, National Bureau of Economic Research, Inc, number hick60-1, octubre-d.
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  13. De Long, J. Bradford & Shleifer, Andrei, 1991. "The stock market bubble of 1929: evidence from clsoed-end mutual funds," The Journal of Economic History, Cambridge University Press, vol. 51(03), pages 675-700, September.
  14. Allan H. Meltzer, 1963. "The Demand for Money: The Evidence from the Time Series," Journal of Political Economy, University of Chicago Press, vol. 71, pages 219.
  15. Mishkin, Frederic S., 1978. "The Household Balance Sheet and the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 38(04), pages 918-937, December.
  16. Karl Brunner & Allan H. Meltzer, 1968. "What Did We Learn from the Monetary Experience of the United States in the Great Depression?," Canadian Journal of Economics, Canadian Economics Association, vol. 1(2), pages 334-348, May.
  17. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  18. Boughton, James M & Wicker, Elmus R, 1979. "The Behavior of the Currency-Deposit Ratio during the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 405-18, November.
  19. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280.
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  22. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  23. Eichengreen, Barry & Sachs, Jeffrey, 1985. "Exchange Rates and Economic Recovery in the 1930s," The Journal of Economic History, Cambridge University Press, vol. 45(04), pages 925-946, December.
  24. Hunter, Helen Manning, 1982. "The Role of Business Liquidity During the Great Depression and Afterwards: Differences Between Large and Small Firms," The Journal of Economic History, Cambridge University Press, vol. 42(04), pages 883-902, December.
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  27. Calomiris, Charles W & Hubbard, R Glenn, 1989. "Price Flexibility, Credit Availability, and Economic Fluctuations: Evidence from the United States, 1894-1909," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 429-52, August.
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