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Agricultural Investment and the Interwar Business Cycle

  • James L. Butkiewicz

    ()

    (Department of Economics, University of Delaware)

  • Matthew A. Martin

    ()

    (Economy.Com, Inc.)

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.

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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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Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 03-10.

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Length: 33 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:dlw:wpaper:03-10
Contact details of provider: Postal: Purnell Hall, Newark, Delaware 19716
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/

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  1. Christina D. Romer, 1991. "What Ended the Great Depression?," NBER Working Papers 3829, National Bureau of Economic Research, Inc.
  2. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
  3. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  4. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  5. Temin, Peter & Wigmore, Barrie A., 1990. "The end of one big deflation," Explorations in Economic History, Elsevier, vol. 27(4), pages 483-502, October.
  6. Alston, Lee J., 1983. "Farm Foreclosures in the United States During the Interwar Period," The Journal of Economic History, Cambridge University Press, vol. 43(04), pages 885-903, December.
  7. 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.
  8. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  9. 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.
  10. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-42, October.
  11. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  12. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
  13. Runkle, David E, 1987. "Vector Autoregressions and Reality: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 454, October.
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