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The Macroeconomics of the Great Depression: A Comparative Approach

  • Bernanke, Ben S

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 27 (1995)
Issue (Month): 1 (February)
Pages: 1-28

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Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:1:p:1-28
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
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  4. Choudhri, Ehsan U & Kochin, Levis A, 1980. "The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 565-74, November.
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  16. Cooper, Russell, 1990. "Predetermined Wages and Prices and the Impact of Expansionary Government Policy," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 205-14, April.
  17. Christina D. Romer, 1993. "The Nation in Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 19-39, Spring.
  18. Eichengreen, Barry, 1995. "Central bank co-operation and exchange rate commitments: the classical and interwar gold standards compared," Financial History Review, Cambridge University Press, vol. 2(02), pages 99-117, October.
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