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Inflation expectations and recovery in spring 1933

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  • Jalil, Andrew J.
  • Rua, Gisela

Abstract

This paper uses the historical narrative record to determine whether inflation expectations shifted during the second quarter of 1933, precisely as the recovery from the Great Depression took hold. First, by examining the historical news record and the forecasts of contemporary business analysts, we show that inflation expectations increased dramatically. Second, using an event-study approach, we identify the effect of the key events that shifted inflation expectations on financial markets. Third, we gather new evidence—both quantitative and narrative—that indicates that the shift in inflation expectations played a causal role in stimulating the recovery.

Suggested Citation

  • Jalil, Andrew J. & Rua, Gisela, 2016. "Inflation expectations and recovery in spring 1933," Explorations in Economic History, Elsevier, vol. 62(C), pages 26-50.
    • Handle: RePEc:eee:exehis:v:62:y:2016:i:c:p:26-50
    DOI: 10.1016/j.eeh.2016.07.001
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    6. Poelmans, Eline & Taylor, Jason E. & Raisanen, Samuel & Holt, Andrew C., 2022. "Estimates of employment gains attributable to beer legalization in spring 1933," Explorations in Economic History, Elsevier, vol. 84(C).
    7. Colin Weiss, 2020. "Contractionary Devaluation Risk: Evidence from the Free Silver Movement, 1878-1900," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 705-720, October.
    8. Carola Conces Binder & Gillian Brunet, 2022. "Inflation expectations and consumption: Evidence from 1951," Economic Inquiry, Western Economic Association International, vol. 60(2), pages 954-974, April.
    9. Reis, Ricardo, 2022. "Losing the inflation anchor," LSE Research Online Documents on Economics 112462, London School of Economics and Political Science, LSE Library.
    10. Carola Binder & Rupal Kamdar, 2022. "Expected and Realized Inflation in Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 131-156, Summer.
    11. Ricardo Reis, 2021. "Losing the inflation anchor," Discussion Papers 2123, Centre for Macroeconomics (CFM).
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    More about this item

    Keywords

    E31; E32; E12; N42; Inflation expectations; Great Depression; Narrative evidence; Liquidity trap; Regime change;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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