Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Fragility and the Great Depression

Contents:

Author Info

  • Russell Cooper
  • Dean Corbae

Abstract

We analyze a financial collapse, such as the one which occurred during the Great Depression, from the perspective of a monetary model with multiple equilibria. The economy we consider contains financial fragility due to increasing returns to scale in the intermediation process. Intermediaries provide the link between savers and firms who require working capital for production. Fluctuations in the intermediation process are driven by variations in the confidence agents place in the financial system. Our model matches quite closely the qualitative movements in some financial and real variables (the currency/deposit ratio, ex-post real interest rates, the level of intermediated activity, deflation, employment and production) during the Great Depression period.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w6094.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6094.

as in new window
Length:
Date of creation: Jul 1997
Date of revision:
Publication status: published as Cooper, Russell and Dean Corbae. "Financial Collapse: A Lesson From The Great Depression," Journal of Economic Theory, 2002, v107(2,Dec), 159-190.
Handle: RePEc:nbr:nberwo:6094

Note: EFG ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Boyd, John H. & Prescott, Edward C., 1986. "Financial intermediary-coalitions," Journal of Economic Theory, Elsevier, Elsevier, vol. 38(2), pages 211-232, April.
  2. Chatterjee, S. & Corbae, D., 1990. "Endogenous Market Participation and the General Equelibrium Value of Money," Working Papers, University of Iowa, Department of Economics 90-30a, University of Iowa, Department of Economics.
  3. Freeman, Scott, 1988. "Banking as the Provision of Liquidity," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 61(1), pages 45-64, January.
  4. Robert A. Margo, 1992. "Employment and Unemployment in the 1930s," NBER Working Papers 4174, National Bureau of Economic Research, Inc.
  5. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," NBER Working Papers 3974, National Bureau of Economic Research, Inc.
  6. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, Elsevier, vol. 21(2), pages 265-293, October.
  7. Bryant, John, 1987. "The Paradox of Thrift, Liquidity Preference and Animal Spirits," Econometrica, Econometric Society, Econometric Society, vol. 55(5), pages 1231-35, September.
  8. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 14-31, March.
  9. Chatterjee, Satyajit & Cooper, Russell & Ravikumar, B, 1993. "Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(4), pages 795-811, October.
  10. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  11. Cooper, Russell & Ejarque, Joao, 1995. "Financial intermediation and the Great Depression: a multiple equilibrium interpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 43(1), pages 285-323, December.
  12. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  13. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, Elsevier, vol. 19(2), pages 145-169, March.
  14. Fulghieri, Paolo & Rovelli, Riccardo, 1998. "Capital markets, financial intermediaries, and liquidity supply," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(9), pages 1157-1180, September.
  15. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(3), pages 441-63, August.
  16. Azariadis, Costas & Smith, Bruce, 1998. "Financial Intermediation and Regime Switching in Business Cycles," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 516-36, June.
  17. Russell Cooper & Joao Ejarque, 1995. "Financial Intermediation and The Great Depression: A Multiple Equilibrium Interpretation," NBER Working Papers 5130, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Lagunoff, Roger & Schreft, Stacey L., 2001. "A Model of Financial Fragility," Journal of Economic Theory, Elsevier, Elsevier, vol. 99(1-2), pages 220-264, July.
  2. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2003. "Liquidity flows and fragility of business enterprises," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(6), pages 1215-1241, September.
  3. Franklin Allen & Douglas Gale, 1999. "Financial Contagion," Levine's Working Paper Archive 2092, David K. Levine.
  4. Dressler, Scott J., 2009. "Economies of scale in banking, confidence shocks, and business cycles," MPRA Paper 13310, University Library of Munich, Germany.
  5. Den Haan, Wouter J., 2003. "Temporary shocks and unavoidable transitions to a high-unemployment regime," Working Paper Series, European Central Bank 0239, European Central Bank.
  6. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
  7. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6094. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.