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Agricultural Investment and the Interwar Business Cycle

Author

Listed:
  • James L. Butkiewicz

    () (Department of Economics, University of Delaware)

  • Matthew A. Martin

    () (Economy.Com, Inc.)

Abstract

During the interwar period, the agricultural sector was a much larger component of the United States economy than at present. Thus, changes in agricultural fortunes had a larger impact on macroeconomic events than is the case today. The Great Depression and concomitant collapse of commodity prices adversely affected the farming sector, as did the drought that distressed many farming regions during this period. Farmers’ income plummeted, sharply curtailing investment in farm equipment. One key goal of the New Deal agricultural policies was to reverse the fortunes of the agricultural sector. Price supports and production control programs attempted to increase farmers’ incomes, enabling them to reverse the dramatic drop in equipment investment that occurred during the contraction period. This paper investigates the macroeconomic impact of investment in agricultural equipment on the aggregate economy. Results obtained support the hypothesis that increased expenditures for agricultural equipment contributed to the strength of the recovery, especially during the crucial early years of the recovery.

Suggested Citation

  • James L. Butkiewicz & Matthew A. Martin, 2003. "Agricultural Investment and the Interwar Business Cycle," Working Papers 03-10, University of Delaware, Department of Economics.
  • Handle: RePEc:dlw:wpaper:03-10
    as

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    File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2003/UDWP2003-10.pdf
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    References listed on IDEAS

    as
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    3. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
    4. Romer, Christina D., 1992. "What Ended the Great Depression?," The Journal of Economic History, Cambridge University Press, vol. 52(04), pages 757-784, December.
    5. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
    6. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
    7. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    8. Madsen, Jakob B., 2001. "Agricultural Crises And The International Transmission Of The Great Depression," The Journal of Economic History, Cambridge University Press, vol. 61(02), pages 327-365, June.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agriculture; Great Depression;

    JEL classification:

    • N - Economic History
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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