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Quantitative Easing in the 1930s

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  • CHRISTOPHER HANES

Abstract

During the 1934–39 recovery from the U.S. Great Depression, overnight interest rates were usually at a lower bound. Meanwhile, American monetary authorities followed policies related to today's debates on quantitative easing: they tried to stabilize yields on Treasury bonds with open market operations; they created rapid growth in high‐powered money; and they allowed transitory factors to affect high‐powered money. Effects of these policies on bond yields reveal a portfolio effect of short‐duration asset supply on term premiums. This portfolio effect helps explain why high‐powered money growth was associated with recovery of real activity over 1934–39.

Suggested Citation

  • Christopher Hanes, 2019. "Quantitative Easing in the 1930s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1169-1207, August.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:5:p:1169-1207
    DOI: 10.1111/jmcb.12589
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    File URL: https://doi.org/10.1111/jmcb.12589
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    References listed on IDEAS

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    Cited by:

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    2. Roberto A. De Santis & Fédéric Holm‐Hadulla, 2020. "Flow Effects of Central Bank Asset Purchases on Sovereign Bond Prices: Evidence from a Natural Experiment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(6), pages 1467-1491, September.

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