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The Effect of Changes in Reserve Requirements During the 1930s: The Evidence from Nonmember Banks

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  • CARGILL, THOMAS F.
  • MAYER, THOMAS

Abstract

Despite the widespread acceptance of Friedman and Schwartz s interpretation of the 1936 37 increase in member bank reserve requirements as the major cause of the 1937 38 recession there is surprisingly little straightforward evidence on this issue, perhaps because data limitations and structural instability preclude econometric modeling. We exploit a simple alternative, comparing member banks with nonmember banks not subject to changes in reserve requirements. The results support the hypothesis that the increase in reserve requirements reduced the availability of bank credit and contributed to the recession.

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Bibliographic Info

Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 66 (2006)
Issue (Month): 02 (June)
Pages: 417-432

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Handle: RePEc:cup:jechis:v:66:y:2006:i:02:p:417-432_00

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Cited by:
  1. Gabriel P. Mathy, 2014. "Uncertainty Shocks and Equity Return Jumps and Volatility During the Great Depression," Working Papers 2014-02, American University, Department of Economics.
  2. Velibor Milošević, 2014. "Use and Limitations of the Reserve Requirement Policy in Montenegro," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 3(2), pages 5-20.
  3. Charles W. Calomiris & Joseph Mason & David Wheelock, 2011. "Did Doubling Reserve Requirements Cause the Recession of 1937-1938? A Microeconomic Approach," NBER Working Papers 16688, National Bureau of Economic Research, Inc.

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