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Could a large scale asset purchase programme have mitigated the Great Depression?

Author

Listed:
  • Garabedian, Garo

    (Central Bank of Ireland)

  • Stuart, Rebecca

    (Central Bank of Ireland)

Abstract

Since Friedman and Schwarz (1963), the role of the Federal Reserve during the Great Depression has been an issue of debate. In this paper, we focus on the purchases of government securities by the Federal Reserve over a four-month period in 1932. Using a Bayesian VAR model, we estimate the effect of an extension of this programme in conjunction with an interest rate cut on a range of variables capturing prices, output and macro-financial linkages. Our results indicate that this policy would have substantially shortened and reduced the impact of the Great Depression.

Suggested Citation

  • Garabedian, Garo & Stuart, Rebecca, 2018. "Could a large scale asset purchase programme have mitigated the Great Depression?," Research Technical Papers 7/RT/18, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:7/rt/18
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    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/07rt18---could-a-large-scale-asset-purchase-programme-have-mitigated-the-great-depression-(garabedian-and-stuart).pdf?sfvrsn=7
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    More about this item

    Keywords

    Federal Reserve; Bayesian VARs; Quantitative easing; Great Depression;
    All these keywords.

    JEL classification:

    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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