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Did the FED respond to liquidity shortage episodes during the Great Depression ?

Author

Listed:
  • Olivier Damette

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Antoine Parent

    (IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon, LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)

Abstract

The October 1929 crash led to a complete freeze of New York open markets. Studying the Fed monetary policy conduct in a nonlinear framework, using credit spreads between open market rates and the Fed's instrument rates as a proxy for liquidity risk, we present econometric evidence that the Fed was well aware of such risks as early as 1930, reacted to the financial stress and altered its monetary policy in consequence. Our outcomes revisit conventional wisdom about the presumed passivity of the Fed throughout the 30s.

Suggested Citation

  • Olivier Damette & Antoine Parent, 2018. "Did the FED respond to liquidity shortage episodes during the Great Depression ?," Post-Print hal-01762624, HAL.
    • Handle: RePEc:hal:journl:hal-01762624
    DOI: 10.1017/S1365100516001073
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    Cited by:

    1. Etienne Farvaque & Antoine Parent & Piotr Stanek, 2018. "Debates and dissident inside the FOMC during WW2," Post-Print hal-03567133, HAL.
    2. repec:hal:spmain:info:hdl:2441/2cuu3uj58199fphtovctj05ish is not listed on IDEAS

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