Could a monetary base rule have prevented the great depression?
This paper continues an ongoing investigation of the properties of a specific, quantitative, and operational rule for the conduct of monetary policy, a rule that specifies settings of the monetary base that are designed to keep nominal GNP growing smoothly at a noninflationary rate. Whereas previous studies have examined the rule's performance in the context of United States experience since World War II, the present paper is concerned with the period 1923-1941. Counterfactual historical simulations are conducted with the rule and a small model of nominal GNP determination, estimated with U.S. quarterly data for 1922-1941. Residuals from the estimated relationships serve as estimates of the behavioral shocks that occurred and accordingly are fed into the simulation process quarter by quarter. The simulation results indicate that nominal GNP would have been kept reasonably close to a steady 3 percent growth path over 1923-1941 if the rule had been in effect, in which case it is highly unlikely that real output and employment could have collapsed as they did during the 1930s.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:26:y:1990:i:1:p:3-26. 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: (Zhang, Lei)
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.