Great Apprehensions, Prolonged Depression: Gauti Eggertsson on the 1930s
Gauti Eggertsson uses a dynamic stochastic general equilibrium model in arguing that the period 1933 to 1937 represented recovery from the Great Depression, by virtue of regime change between the Hoover and Roosevelt administrations. He claims that the Hoover administration was defined by adherence to three â€œpolicy dogmas,â€ and that Roosevelt shifted expectations for the better by making credible commitments rejecting those dogmas. Eggertssonâ€™s argument is wrong on several counts. He misrepresents Hooverâ€™s economic policies, he mischaracterizes Roosevelt as â€œdogma-freeâ€ and committed to a clear alternative plan for recovery, and he misreads the economic consequences of Rooseveltâ€™s policies. Eggertssonâ€™s problems begin with his notion of â€œrecovery,â€ wherein the economyâ€™s progression from critical condition to prolonged infirmity is trumpeted as â€œrecovery.â€ Eggertssonâ€™s article is entitled â€œGreat Expectations;â€ I have titled this piece â€œGreat Apprehensionsâ€ because the Hoover-Roosevelt period needs to be seen a whole, in which the statist trend of policy and rhetoric created great uncertainty about the rules under which enterprise and investment would proceed. Moreover, Eggertssonâ€™s narrative cutoff at 1937 is misleading and opportunistic, as the ensuing years are all part of the same prolonged apprehension and under-performance.
Volume (Year): 6 (2009)
Issue (Month): 3 (September)
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- Gauti B. Eggertsson, 2008.
"Great Expectations and the End of the Depression,"
American Economic Review,
American Economic Association, vol. 98(4), pages 1476-1516, September.
- Gauti B. Eggertsson, 2005. "Great expectations and the end of the depression," Staff Reports 234, Federal Reserve Bank of New York.
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- Michael D. Bordo & Ehsan U. Choudhri & Anna J. Schwartz, 1999. "Was Expansionary Monetary Policy Feasible During the Great Contraction? An Examination of the Gold Standard Constraint," NBER Working Papers 7125, National Bureau of Economic Research, Inc.
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- Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
- Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
- Richard H. Timberlake, 2005. "Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 196-233, August. Full references (including those not matched with items on IDEAS)
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